PILLARSTONE CAPITAL REIT 2025年底已无资产，面临持续经营重大不确定性

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025

OR

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-15409

PILLARSTONE CAPITAL REIT

(Exact Name of Registrant as Specified in Its Charter)

Registrant's telephone number, including area code: 281-747-9997

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Shares of Beneficial Interest, par value $0.01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐       Accelerated filer ☐       Non-accelerated filer ☒       Smaller reporting company ☒       Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
 
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☒ No ☐

The aggregate market value of the voting common shares held by non-affiliates of the registrant as of June 30, 2026 (the last business day of the registrant's most recently completed second fiscal quarter) was approximately $4,609 based on the closing price of $0.0154 per common share on the Pink Market of the OTC Markets Group on March 23, 2026, the last date before June 30, 2026 for which a trading price was reported on the Expert Market of the OTC Markets Group.

As of October 1, 2026, the Registrant had issued 695,214 common shares of beneficial interest and had 657,084 shares outstanding after deducting 38,130 shares held in treasury.

PILLARSTONE CAPITAL REIT

FORM 10-K

Year Ended December 31, 2025

Unless the context otherwise requires, all references in this report to the “Company,” “we,” “us” or “our” are to Pillarstone Capital REIT and its subsidiaries, including subsidiaries deconsolidated from our consolidated financial statements.

On December 1, 2023, Whitestone Uptown Tower, LLC, an indirect subsidiary of Pillarstone Capital REIT (the “Company,” “Pillarstone,” “we,” “our,” or “us”), filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership, Case No. 23-32832-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

On March 4, 2024, bankruptcy cases were filed by Pillarstone OP, as well as Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, the subsidiaries owning our Real Estate Assets other than Uptown Tower, which were consolidated into the jointly administered cases styled In re: Whitestone Industrial-Office, LLC, et. al., Case No. 24-30653-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

As a result of these bankruptcy filings, as required under U.S. GAAP, we deconsolidated the bankrupt subsidiaries from our consolidated financial statements effective with their bankruptcy filings. We previously deconsolidated Whitestone Uptown Tower, LLC effective with its bankruptcy filing on December 1, 2023.

Forward-Looking Statements

The following discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto in this Annual Report on Form 10-K.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws, including discussion and analysis of our financial condition, anticipated capital expenditures required to complete projects, amounts of anticipated cash distributions to our shareholders in the future and other matters. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “potential,” “predicts,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” or the negative of such terms and variations of these words and similar expressions, although not all forward-looking statements include these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. You are cautioned not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this Annual Report on Form 10-K. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

Factors that could cause actual results to differ materially from any forward-looking statements made in this Annual Report on Form 10-K include:

In addition, an investment in the Company involves numerous risks that potential investors should consider carefully, including, without limitation:

PART I

Item 1. Business.

Company Overview

Pillarstone Capital REIT (the “Company,” “Pillarstone,” “we,” “our,” or “us”) is a Maryland real estate investment trust (“REIT”) engaged in investing in, owning and operating commercial properties. As of December 31, 2025, the Company no longer owned any properties and continued to pursue claims in its bankruptcy proceedings discussed in this report.

The Company was formed on March 15, 1994 as a Maryland REIT. The Company operated as a traditional REIT by buying, selling, owning and operating commercial and residential properties through December 31, 1999. In 2000, the Company purchased a software technology company, resulting in the Company no longer meeting qualifications to be a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). In 2002, the Company discontinued the operations of the technology segment.

From 2003 through 2006, we pursued a value-added business plan primarily focused on acquiring well-located, under-performing multifamily residential properties, including affordable housing communities, and repositioning them through renovation, leasing, improved management and branding. In 2006, the Company did not complete a public offering for a portfolio acquisition due to market conditions, and consequently, was not able to meet the listing requirements of the former American Stock Exchange (“Amex”). Accordingly, Pillarstone’s common shares were delisted from the Amex and commenced being quoted on the Over-The-Counter Bulletin Board (“OTC Bulletin Board”), the Pink Market, and currently on the Expert Market under the symbol “PRLEQ”.

From 2006 until December 2016, the Company continued its existence as a corporate shell filing its quarterly and annual reports with the Securities and Exchange Commission ("SEC") so that it could be used for future real estate transactions. During this time, the Company was funded by the trustees who contributed $500,000 in exchange for 125,000 Class C Convertible Preferred Shares and $197,780 in exchange for convertible notes payable. In 2016, the shareholders of Pillarstone approved changing the Company's name from Paragon Real Estate Equity and Investment Trust to Pillarstone Capital REIT.

Substantially all of our business has been conducted through Pillarstone Capital REIT Operating Partnership LP, a Delaware limited partnership organized in 2016 (“Pillarstone OP”). We are the sole general partner of Pillarstone OP. Since August 2026, we have owned all of the outstanding equity in Pillarstone OP.

On December 8, 2016, we and Pillarstone OP, entered into a Contribution Agreement (the “Contribution Agreement”) with Whitestone REIT Operating Partnership, L.P. (“Whitestone OP”), a subsidiary and the operating partnership of Whitestone REIT, both of which were related parties to Pillarstone and Pillarstone OP. Pursuant to the terms of the Contribution Agreement, Whitestone OP contributed to Pillarstone OP all of the equity interests in four of its wholly-owned subsidiaries (the “Subsidiaries”): Whitestone CP Woodland Ph. 2, LLC, a Delaware limited liability company; Whitestone Industrial-Office, LLC, a Texas limited liability company; Whitestone Offices, LLC, a Texas limited liability company; and Whitestone Uptown Tower, LLC, a Delaware limited liability company (“Uptown Tower”) that owned 14 real estate assets (the “Real Estate Assets” and, together with the Subsidiaries (the “Property”)), for aggregate consideration of approximately $84 million, consisting of (1) approximately $18.1 million of Class A units representing limited partnership interests in Pillarstone OP (“OP Units”), issued at a price of $1.331 per OP Unit; and (2) the assumption of approximately $65.9 million of liabilities by Pillarstone OP. Pursuant to the Contribution Agreement, Pillarstone became the general partner of Pillarstone OP with an equity ownership interest in Pillarstone OP totaling approximately 18.6% valued at $4.1 million as of the date of the Contribution Agreement.

Pursuant to the Contribution Agreement, Pillarstone agreed to file with the SEC on or prior to June 8, 2018, a shelf registration statement to register for sale under the Securities Act of 1933, as amended (the “Securities Act”), the issuance of the common shares in the Company that may be issued upon redemption of the OP Units issued pursuant to the Contribution Agreement and the offer and resale of such common shares by the holders thereof. In addition, pursuant to the Contribution Agreement, in the event of a Change of Control (as defined therein), Pillarstone OP shall have the right, but not the obligation, to repurchase the OP Units issued thereunder from Whitestone OP at their initial issue price of $1.331 per OP Unit. Pillarstone and Whitestone agreed to extend the filing of the shelf registration statement to the date that the Company closes a public equity offering.

In connection with the Contribution Agreement, (1) with respect to each Real Estate Asset (other than the Real Property Asset owned by Uptown Tower), Whitestone TRS, Inc. (“Whitestone TRS”), a subsidiary of Whitestone, entered into a Management Agreement with Pillarstone OP who owns such Real Estate Asset and (2) with respect to Uptown Tower, Whitestone TRS entered into a Management Agreement with Pillarstone OP (collectively, the “Management Agreements”). Pursuant to the Management Agreements with respect to each Real Estate Asset (other than Uptown Tower), Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services to such Real Estate Asset in exchange for (x) a monthly property management fee equal to 5.0% of the monthly revenues of such Real Estate Asset and (y) a monthly asset management fee equal to 0.125% of gross asset value ("GAV") (as defined in each Management Agreement as, generally, the purchase price of the respective Real Estate Asset based upon the purchase price allocations determined pursuant to the Contribution Agreement, excluding all indebtedness, liabilities or claims of any nature) of such Real Estate Asset. Pursuant to the Management Agreement with respect to Uptown Tower, Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services to Pillarstone OP in exchange for (x) a monthly property management fee equal to 3.0% of the monthly revenues of Uptown Tower and (y) a monthly asset management fee equal to 0.125% of GAV of Uptown Tower. These activities were conducted by Whitestone TRS and Whitestone REIT using their own employees, processes, and systems and in some cases, third-party providers for services they sub-contracted to perform. 

1

As a result of the Contribution Agreement, Whitestone OP owned approximately 81.4% and Pillarstone owned approximately 18.6% of the outstanding equity in Pillarstone OP, which was fully consolidated in Pillarstone's financial statements until its bankruptcy filing on March 4, 2024.

On July 19, 2022, we received written notice that Whitestone TRS confirmed termination of the management agreements for the Real Estate Assets. We had previously communicated to Whitestone REIT our plan to internalize the management of our Real Estate Assets, but we had not made efforts to terminate the management agreements or transition the management activities. However, Whitestone REIT stated in its notice letter that while it had not received written notice of the termination of the management agreements, it “confirms receipt of your intent to terminate, and hereby confirms termination of the Agreements effective 30 days from” July 19, 2022.

Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe, particularly as Whitestone OP owned 81.4% of Pillarstone OP as a limited partner. As a result, we were materially and adversely affected by Whitestone’s abrupt termination of the management agreements, incomplete and inadequate delivery of books and records, our website and other materials required to be delivered under the management agreements, and the failure to provide for an appropriate transition. We had no way to continue our accounting and financial reporting responsibilities as a public company. Further, for several months following the abrupt termination of services by Whitestone, we were unable to systematically invoice our tenants and pursue collection of delinquent accounts.

Within days after the termination of the management agreements by Whitestone, we internalized management and began to manage the Real Estate Assets and our business without an external management company. This process involved commencing a selection process for an enterprise resource planning, or ERP, system of our own. We immediately hired an experienced management team with prior experience working with our property portfolio, including former Whitestone senior staff. Our newly assembled leadership team quickly engaged consultants (a) to assist us in implementing the newly selected ERP system, (b) to analyze, reconcile and transform historical data obtained from Whitestone REIT into a usable format for our new system and (c) to design procedures for regular accounting closes and preparation of accurate and reliable financial statements for our shareholders and other stakeholders.

In 2023, we continued our work to restore operations that were disrupted by Whitestone’s abrupt termination as manager of our Real Estate Assets. In that time, we were working to extend the maturity date or to find new financing for mortgage indebtedness secured by our Uptown Tower office building or a buyer for the Uptown Tower property. The borrower, Whitestone Uptown Tower, LLC, Pillarstone OP’s subsidiary that owned the Uptown Tower office building, was not in compliance with loan covenants. These efforts were unsuccessful and soon after the mortgage’s maturity on October 1, 2023, the lender delivered a notice of foreclosure sale to the borrower.

On December 1, 2023, Whitestone Uptown Tower, LLC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership, Case No. 23-32832-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

On March 4, 2024, bankruptcy cases were filed for Pillarstone Capital REIT and Pillarstone OP, as well as Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, the subsidiaries owning our Real Estate Assets other than Uptown Tower, which were consolidated into the jointly administered bankruptcy cases styled In re: Whitestone Industrial-Office, LLC, et. al., Case No. 24-30653-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, the same court as, but separate cases from, the Whitestone Uptown Tower, LLC bankruptcy case. See Item 3, “Legal Proceedings.”

In October 2024, our subsidiary owning the 9101 LBJ Freeway property sold it for a purchase price of $5,753,000, or approximately $5.1 million after deductions, closing costs and commissions.

In October 2024, our subsidiary owning the Interstate 10 Warehouse property sold it for a purchase price of $8,400,000, or approximately $8.1 million after deductions, closing costs and commissions.

In February 2025, our subsidiary owning the Corporate Park Woodland II property sold it for a purchase price of $1,650,000, or approximately $1.56 million after deductions, closing costs and commissions.

2

In July 2025, our subsidiary owning the Uptown Tower property sold it for a purchase price of $20,000,000, or approximately $17.3 million after deductions, closing costs and commissions.

In July 2025, in a series of related transactions, the subsidiaries owning the remaining Real Estate Assets sold them as follows:

These sales were completed pursuant to the plan of liquidation in the jointly administered bankruptcy cases and the Whitestone Uptown Tower plan of reorganization. We are considering our strategic plans following the outcome of the bankruptcy cases.

Competition

Prior to the sale of the Real Estate Assets, we competed for the acquisition of properties and leasing spaces to tenants with many entities, including, among others, publicly traded REITs, life insurance companies, pension funds, partnerships and individual investors. Following the sale of the Real Estate Assets, we are considering our strategic plans following the outcome of the bankruptcy cases and may be competing with other parties pursuing similar opportunities that we may pursue. We anticipate that many such competitors will have substantially greater financial resources than us and more experience and resources for the types of opportunities we may pursue. In addition, certain competitors may be willing to accept lower returns on their investments. If competitors prevent us from consummating transactions for these opportunities, our capital appreciation and valuation, and our results of operations and financial condition, may be impacted.

Employees

As of December 31, 2025, we had one employee, other than our three executive officers.

Reports to Security Holders

We file or furnish with the SEC pursuant to Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, proxy statements with respect to meetings of our shareholders, as well as Reports on Forms 3, 4 and 5 regarding our officers, trustees or 10% beneficial owners. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC as we do. The website address is http://www.sec.gov. Copies of our Audit Committee Charter, Management, Organization and Compensation Committee Charter, Nominating Committee Charter, and Code of Conduct and Ethics are available free of charge through our website (www.pillarstone-capital.org). In the event of any changes to these documents, revised copies will also be made available on our website at www.pillarstone-capital.org. Materials on our website are not part of our Annual Report on Form 10-K. The contents of these websites are not incorporated into this filing.

Item 1A. Risk Factors

Risks Related to Our Business

Whitestone Uptown Tower, LLC may not prevail in its litigation proceedings with Whitestone.

Whitestone TRS was contracted to perform and maintain the records and processes for much of our accounting and financial reporting functions. As part of the termination of the management agreements, Whitestone removed our access to its accounting and financial software platform. As a result of the abrupt termination of the management agreements, inadequate assistance in the transition of the management of the Real Estate Assets, and Whitestone’s failure to provide a complete copy of our accounting and financial reporting information that was maintained on Whitestone’s accounting and software platform, we had to rebuild our internal accounting and financial reporting processes. To assist with and expedite this process, we retained accounting consultants to (i) recreate the accounting records, processes, and systems that Whitestone did not release in usable electronic format to us, and (ii) incorporate those records that we have received from Whitestone related to the Real Estate Assets and their management. In the meantime, we began directly overseeing the maintenance and operations of the Real Estate Assets. In the course of doing so, we confirmed that certain Real Estate Assets deteriorated following significant deferred maintenance and neglect while under Whitestone’s management. We began working to address these deferred maintenance and other operating issues, and new issues dating back to Whitestone’s management emerged regularly.

3

We discovered significant deferred maintenance and neglect of our assets had occurred under Whitestone’s management. Our efforts to address these matters were in some cases stymied by Whitestone’s litigation against us in Delaware where the Delaware court limited our ability to incur expenses above low threshold amounts for the types of expenses a company in our industry could expect to incur in the ordinary course of business. Our legal and professional fees increased substantially as we addressed the internalization of management and the litigation matters discussed in this report. As a result, on September 16, 2022, we filed a lawsuit against Whitestone TRS, Inc., Whitestone REIT and Whitestone OP in the District Court, Harris County, Texas, 189th Judicial District alleging, among other things, breach of the Pillarstone OP limited partnership agreement and the management agreements for the Real Estate Assets by the Whitestone defendants and breach of fiduciary duties relating to Pillarstone OP by Whitestone OP going outside the role of limited partner and harming us and Pillarstone OP. We moved portions of this case relating to Uptown Tower into the Whitestone Uptown Tower, LLC bankruptcy in 2025. Despite the settlement of claims by the plan agent and Whitestone with respect to the jointly administered bankruptcy case, this case, along with other litigation matters involving Uptown Tower, continues in the Whitestone Uptown Tower, LLC bankruptcy case as of the date of this report.

This litigation has been and is expected to continue to be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of these proceedings are difficult to predict. As a result, future adverse rulings, settlements, or unfavorable developments could result in charges that could have a material adverse effect on any distribution to us as result of the Whitestone Uptown Tower, LLC bankruptcy.

Since the termination of our management agreements by Whitestone, we have incurred significant losses, which raises substantial doubt about our ability to continue as a going concern.

The accompanying financial statements have been prepared assuming that we will continue as a going concern. As discussed in Note 1 to the consolidated financial statements included in this report, we have incurred significant losses and have an accumulated deficit of approximately $25.2 million as of December 31, 2025 and need to raise substantial amounts of additional funds to meet our obligations and afford us time to implement our business plan and resume profitable operations.

We worked diligently to restore normal operations and leasing activities following Whitestone’s unanticipated termination of its managerial services. Many of Pillarstone’s actions were affected by a lack of usable information being made available to us by Whitestone on a timely basis. Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe, particularly as Whitestone OP owned 81.4% of Pillarstone OP as a non-controlling limited partner. We believe the management functions as operated by Whitestone were deeply integrated with Whitestone’s management functions for its own business and have been difficult, expensive, and time-consuming to separate, causing material adverse effects on our business, income, cash flow, results of operations, financial condition, liquidity and prospects. As a result, Whitestone did significant damage to us by its intentional actions. In addition, our litigation with Whitestone has been, and following the period covered by this report continued to be, expensive, lengthy, and disruptive to normal business operations. Moreover, the results of these proceedings had been, and following the period covered by this report are expected to continue to be, difficult to predict. As a result, future adverse rulings, settlements, or unfavorable developments could result in charges that could have a material adverse effect on our business, results of operations or financial condition.

Until the sales of our Real Estate Assets in 2024 and 2025, we were depending on cash generated by our ownership of our Real Estate Assets to meet our liquidity needs. Our debts have been repaid from the proceeds from the sales of our Real Estate Assets in accordance with our plan of liquidation and the Whitestone Uptown Tower, LLC plan of reorganization.

Historically, we have financed our long-term capital needs, including acquisitions, as follows:

To implement our business strategy, additional capital will need to be raised. Our ability to access the capital markets will be dependent on a number of factors, including general market conditions and market perceptions about our Company. There can be no assurance that we will be able to raise capital, obtain debt financing, or improve operating results sufficiently to continue as a going concern, if at all. The consolidated financial statements included in this report do not include any adjustments that might result from the outcome of this uncertainty.

4

We have identified material weaknesses in our internal controls over financial reporting. If we fail to maintain an effective system of internal controls, such failure could cause investors to lose confidence in our reported financial information, which could harm our business and have a material adverse effect on the price of our common shares.

Management identified material weaknesses in our internal controls over financial reporting including:

Management concluded that as of December 31, 2025 and continuing to the date of the filing of this report, our internal control over financial reporting was not effective to provide reasonable assurance of the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

These material weaknesses arose in large part because of Whitestone’s abrupt termination in August 2022 of managerial services it provided, on-going litigation with Whitestone and the subsequent bankruptcy filings. At the date its managerial services ceased, we did not have our own personnel, processes or systems needed for proper accounting and financial reporting. While we immediately began to address these needs after Whitestone’s termination, we were unable to complete the design and implementation of appropriate internal control over financial reporting. Our efforts were stymied first by Whitestone’s litigation against us in Delaware where the Delaware court limited our ability to incur expenses above low threshold amounts and then by the subsequent bankruptcy filings in 2023 and 2024. These material weaknesses did not result in a material misstatement of our consolidated financial statements for the periods presented.

We have been working diligently on the process of designing and implementing effective internal control measures to remediate the reported material weaknesses. The Company’s efforts include implementing an enterprise-wide system of our own. This implementation was completed in 2023. We are using contract personnel for specialized accounting and financial reporting roles.

While we believe that these efforts have improved our internal control over financial reporting, our remediation efforts are ongoing and will require validation and testing of the design and operating effectiveness of internal controls. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the remaining material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weaknesses in our internal control over financial reporting.

We face risks associated with our property development.

We are considering our strategic plans following the outcome of the bankruptcy cases, which may include developing properties where we believe market conditions warrant such investment. Once made, our investments may not produce results in accordance with our expectations. Risks associated with potential future development and construction activities include:

We face risks associated with property acquisitions.

We are considering our strategic plans following the outcome of the bankruptcy cases, which may include the acquisition of portfolios of properties. Our acquisition activities and their success are subject to the following risks:

5

We may face competition for acquisition opportunities with other investors, and this competition may adversely affect us by subjecting us to the following risks:

Because we have nominal operations and revenue, we are considered a “shell company” and are subject to more stringent reporting requirements.

The SEC adopted Securities Act Rule 405 and Exchange Act Rule 12b-2 which define a shell company as a registrant that has no or nominal operations, and either (a) no or nominal assets; (b) assets consisting solely of cash and cash equivalents; or (c) assets consisting of any amount of cash and cash equivalents and nominal other assets. Therefore, following the sale of the Real Estate Assets, we are a shell company. The new rules prohibit shell companies from using a Form S-8 to register securities pursuant to employee compensation plans. However, SEC rules do not prevent us from registering securities pursuant to registration statements and may require a Securities Act registration in connection with a business combination as a result of shell company status. Additionally, the new rule regarding Form 8-K requires shell companies to provide more detailed disclosure upon completion of a transaction that causes it to cease being a shell company. We must file a current report on Form 8-K containing the information required pursuant to Regulation S-K and in a registration statement on Form 10, within four business days following completion of the transaction together with financial information of the private operating company. In order to assist the SEC in the identification of shell companies, we are also required to check a box on Form 10-Q and Form 10-K indicating that we are a shell company. To the extent that we are required to comply with additional disclosure because we are a shell company, we may be delayed in executing any business combinations or acquiring other assets that would cause us to cease being a shell company. In addition, the SEC adopted a new Rule 144 effective February 15, 2008, which makes resales of restricted securities by shareholders of a shell company more difficult.

We currently have limited operations, and investors therefore have a limited basis on which to evaluate the Company’s future prospects.

We currently have limited operations, which primarily relate to the bankruptcy cases of our subsidiaries, and we may be reliant upon a transaction with an operating business or acquisition of assets to commence business operations and generate material revenue. Because we have limited operations, investors have a limited basis upon which to evaluate our ability to achieve our business objectives. We are considering our strategic plans following the outcome of the bankruptcy cases and have no current arrangements or understandings with any prospective target business or seller of assets concerning such a transaction and may be unable to complete such a transaction or commence business operations in a reasonable timeframe, on reasonable terms or at all. If we fail to complete such a transaction or commence business operations, we may never generate any operating revenues.

We may face difficulties or delays in our search for a business combination or new assets, and we may not have access to sufficient capital to consummate such a transaction.

We may face difficulty identifying a viable business opportunity or negotiating or paying for any resulting business transaction. Economic factors that are beyond our control, including the economic downturns, as well as increased competition for business opportunities that we expect to encounter as a result thereof, may hinder our efforts to locate or obtain a business opportunity that is suitable for our business goals at a price we can afford and on terms that will enable us to sufficiently grow our business to generate value to our shareholders. We may not be able to take advantage of any available business opportunities on favorable terms or at all due to the limited availability of capital. There can be no assurance that we will have sufficient capital to provide us with the necessary funds to successfully develop and implement a plan of operation or acquire a business or assets we deem to be appropriate or necessary to accomplish our objectives, in which case we may be forced to terminate our business plan and your investment in the Company could become worthless.

6

If we are not successful in acquiring or developing a new business and generating material revenues, investors will likely lose their investment.

If we are not successful in developing a viable business plan and acquiring a new business or assets through which to implement it, our investors’ entire investment in the Company could become worthless. Even if we are successful in combining with an operating entity or acquiring assets, we can provide no assurances that we will be able to generate significant revenue therefrom in the short-term or at all or that investors will derive a profit from their investment. If we are not successful, our investors will likely lose their entire investment.

We may need to raise additional capital in the future by issuing debt or equity securities, the terms of which may dilute our current investors and may reduce or limit their liquidation or other rights.

We may require additional capital to implement a business strategy. We may not be able to obtain additional capital when required. Future business development activities, as well as administrative expenses such as accounting expenses, general overhead, insurance, legal and compliance expenses and salaries, will require a substantial amount of additional capital. The terms of securities we issue in future capital raising transactions may be more favorable to new investors, and may include liquidation preferences, superior voting rights or the issuance of other derivative securities, which could have a further dilutive effect on or subordinate the rights of our current investors. Any additional capital raised through the sale of equity securities will likely dilute the ownership percentage of our shareholders. Additionally, any debt securities we issue would likely include rights in favor of lenders superior to those of our shareholders and, if convertible into shares of common stock, would also pose the risk of dilution.

We may encounter difficulty locating and consummating a business combination or assets to acquire, including as a result of the competitive disadvantages we have.

We expect to face intense competition in our search for business opportunities. Given the current economic climate, we would expect to compete with venture capital firms, larger companies, blank check companies such as special purpose acquisition companies and other investors. These parties may have greater capital or human resources than we do and may have more experience in a particular industry within which we choose to search. Many of these competitors may have more resources than us to take advantage of prospective business opportunities that we may want to pursue. Any delay or inability to locate, negotiate and enter into a transaction for a business opportunity as a result of the disadvantages we have relative to our competitors could cause us to lose valuable business opportunities to our competitors, which would have a material adverse effect on our business.

We may expend significant time and capital on a prospective business opportunity that is not ultimately consummated.

The investigation of each specific target business and any subsequent negotiation and drafting of related agreements, SEC disclosure and other documents will require substantial amounts of management’s time and attention and material additional costs in connection with outsourced services from accountants, attorneys and other professionals. We will likely expend significant time and resources searching for, conducting due diligence on, and negotiating terms in connection with a proposed transaction that may not ultimately come to fruition. Unanticipated issues which may be beyond our control or that of the seller of the applicable business or assets may arise that force us to terminate discussions with a target company or seller of assets, such as the other company’s failure or inability to provide adequate documentation to assist in our investigation, a party’s failure to obtain required waivers or consents to consummate the transaction, a party’s inability to obtain the required audits, applicable laws, charter documents and agreements, the appearance of a competitive bid from another prospective participant, or the other party’s inability to maintain its operations for a sufficient time to allow the transaction to close. Such risks are inherent in any search for a new business or assets, and the pursuit of such a transaction that we do not consummate could be expensive and time-consuming and could cause a material adverse effects on our business, results of operations, financial condition, liquidity and prospects.

We may engage in a transaction that causes tax consequences to us and our shareholders.

Federal and state tax consequences will, in all likelihood, be a significant factor in considering any transaction that we may undertake. Under current federal law, such transactions may be subject to significant taxation to the buyer and its shareholders under applicable federal and state tax laws. While we intend to structure any transaction so as to minimize the federal and state tax consequences to the extent practicable in accordance with our business objectives, there can be no assurance that any such transaction we undertake will meet the statutory or regulatory requirements of a tax-free reorganization or similar favorable treatment or that the parties to such a transaction will obtain the tax treatment intended or expected upon a transfer of equity interests or assets. A non-qualifying reorganization, combination or similar transaction could result in the imposition of significant taxation, both at the federal and state levels, which may have an adverse effect on both parties to the transaction, including our shareholders.

7

It is unlikely that our shareholders will be afforded any opportunity to evaluate or approve a business transaction.

It is unlikely that our shareholders will be afforded the opportunity to evaluate and approve a proposed business combination or asset acquisition. In many cases, such transactions would not require shareholder approval under applicable law, and our declaration of trust and bylaws may not afford our shareholders with the right to approve such a transaction. In order to develop and implement our business plan, we may in the future hire accountants, appraisers, attorneys, financial advisors, technical experts or other consultants to assist with determining our direction and consummating any such proposed transactions. We may rely on such persons in making difficult decisions in connection with our future business and prospects. The selection of any such persons will be made by our board of trustees, and any expenses incurred, or decisions made based on any of the foregoing could prove to be adverse to us and our business and prospects in hindsight, the result of which could be diminished value to our shareholders.

We may attempt to complete a business transaction with a private target company about which little information is available, and such target entity may not generate revenue as expected or otherwise be compatible with us as expected.

In pursuing our search for a business opportunity, we may seek to complete a transaction with a privately held company. Very little public information generally exists about private companies, and the only information available to us prior to making a decision may be from documents and information provided directly to us by the target company in connection with the transaction. Such documents or information or the conclusions we draw therefrom could prove to be inaccurate or misleading. As such, we may be required to make our decision on whether to pursue such a transaction based on faulty, incomplete or limited information, which may result in our subsequent operations generating less revenue than expected, which could materially harm our financial condition and results of operations.

Our ability to assess the management of a prospective target business may be limited and, as a result, we may acquire a target business whose management does not have the skills, qualifications or abilities to enable a seamless transition, which could, in turn, negatively impact our results of operations.

When evaluating the desirability of a potential business opportunity, our ability to assess the target business’s management may be limited due to a lack of information, resources or time. Our management’s assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the abilities, qualifications or skills needed to successfully implement our business strategy. Further, in some cases the other party’s management may want to replace our management. Should the other company’s management not possess the abilities, qualifications or skills necessary to manage a public company or assist with the integration of the other company’s business or entity into ours, the operations and profitability of the post-transaction business may be negatively impacted, which could have a material adverse effect on our business, cash flow, financial condition, income, liquidity, prospects and results of operations.

Changes in laws or regulations, or a failure to comply with the laws and regulations applicable to us, may adversely affect our business, ability to negotiate and complete a transaction for a business opportunity, and results of operations.

In addition to SEC regulations, any business in which we may engage in the future may be subject to substantial legal or regulatory oversight and restrictions, which could hinder our growth and expend material amounts on compliance. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application by courts and administrative judges may also change from time to time, and any such changes could be unfavorable to us and could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could result in material defense or remedial costs and damages and have a material adverse effect on our financial condition.

We face risks in attracting and retaining key personnel.

Our senior executives have strong industry reputations, which aid us in identifying acquisition and development opportunities and negotiating with tenants and sellers of properties. As of the date of this report, we do not have employment agreements with our senior executives. The loss of the services of these key personnel could affect our operations because of diminished relationships with prospective tenants, property sellers and industry personnel. In addition, attracting new or replacement personnel may be difficult in a competitive market.

8

We face risks associated with security breaches through cyber attacks or cyber intrusions, as well as other significant disruptions of our information technology (“IT”) networks and related systems.

We face risks associated with security breaches or disruptions, whether through cyber attacks or cyber intrusions over the internet, malware, computer viruses, attachments to emails, persons inside our organization, persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations. While, to date, we have not had a significant cyber breach or attack that had a material impact on our business or results of operations, there can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions will not be successful or damaging. For example, during the term of the management agreements with Whitestone, Whitestone managed our IT systems and was subject to a ransomware attack that affected our documents, and we cannot be sure of the extent of the damage done to our files despite Whitestone’s recovery of its data files after its payment of the ransom. Following the termination of the management agreements, we have worked on separating our information technology systems from those implemented and maintained by Whitestone. A security breach or other significant disruption involving our IT networks and related systems could adversely impact our financial condition, results of operations, cash flows, liquidity, and the market price of our common shares and would require significant management attention and resources to remedy any resulting damages. As cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and to investigate and remediate any information security vulnerabilities.

Risks Relating to Financing

We face risks associated with the use of debt financing, including refinancing risk.

We are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest.

As we incur indebtedness, we are likely to need to refinance at least a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance debt or that the terms of any refinancing will not be as favorable as the terms of our then-existing debt.

If principal payments due at maturity cannot be refinanced, extended, or repaid with proceeds from other sources, such as new equity capital, our cash flow may not be sufficient to repay all maturing debt in years when significant “balloon” payments come due. In addition, we may rely on debt to fund a portion of our new investments such as our acquisition and development activity. There is a risk that we may be unable to finance these activities on favorable terms or at all. In addition, an increase in interest rates could decrease the amounts third-parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions. These conditions, which increase the cost and reduce the availability of debt, may continue or worsen in the future.

Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on favorable terms, if at all.

Our credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial position, and other factors employed by the credit rating agencies in their rating analysis of us. Our credit ratings can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain. In the event our credit ratings deteriorate, it may be more difficult or expensive to obtain additional financing or refinance then-existing obligations and commitments. Also, a downgrade in our credit ratings would trigger additional costs or other potentially negative consequences under future credit facilities and debt instruments.

The lack of certain limitations on our ability to incur debt could result in our becoming more highly leveraged. Any additional indebtedness incurred may have a material adverse effect on our financial condition and results of operations.

Our governing documents do not limit the amount of indebtedness we may incur. Accordingly, we may incur additional debt and would do so, for example, to improve or develop our existing properties or to acquire new properties. We might become more highly leveraged as a result, and our financial condition might be negatively affected and the risk of default on our indebtedness could increase.

The incurrence of additional indebtedness could have adverse consequences on our business, such as:

9

The impact of any of these potential adverse consequences could have a material adverse effect on our results of operations, financial condition, and liquidity.

Risks Related to the Ownership of Our Common Shares

The market price of our common shares may fluctuate.

The market price of our common shares has been, and may continue to be, subject to fluctuation due to many events and factors such as those described in this report, including:

Furthermore, the stock markets recently have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes, international currency fluctuations or political unrest, may negatively impact the market price of our common shares. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.

Many of the factors listed above are beyond our control. Those factors may cause the market price of our common shares to decline, regardless of our financial performance, condition, and prospects. The market price of our common shares may fall significantly in the future, and it may be difficult for our shareholders to resell our common shares at prices they find attractive.

We do not qualify as a REIT.

Since we do not qualify as a REIT, we are not be allowed to deduct dividends to shareholders in computing our taxable income and are subject to federal income tax at regular corporate rates. The additional tax incurred at regular corporate rates could significantly reduce the cash flows. Furthermore, we are not required by the Internal Revenue Code to make any dividends to our shareholders as a condition to maintain REIT qualification. The REIT qualification requirements are extremely complex, and interpretation of the U.S. federal income tax laws governing REIT qualification is limited. There can be no assurance that we will meet REIT qualifications in the future. In addition, facts and circumstances that may be beyond our control may affect our ability to qualify as a REIT. We cannot assure you that new legislation, regulations, administrative interpretations, or court decisions will not change the tax laws significantly with respect to any future attempts to qualify as a REIT or with respect to the federal income tax consequences of qualification.

Certain provisions of our declaration of trust and bylaws may inhibit a change of our control.

Certain provisions contained in our declaration of trust and bylaws and the Maryland General Corporation Law may discourage a third party from making a tender offer or acquisition proposal to us. If this were to happen, it could delay, deter, or prevent a change in control or the removal of existing management. These provisions also may delay or prevent our shareholders from receiving a premium for their common shares over then-prevailing market prices. These provisions include:

10

In addition, Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the trustees in unsolicited takeover situations and certain “business combinations” and “control share acquisitions.” Our bylaws contain provisions exempting us from the Maryland Control Share Acquisition Act and the Maryland Business Combination Act. Our bylaws prohibit the repeal, amendment or alteration of our Maryland Control Share Acquisition opt out without the approval by the Company’s shareholders; however, there can be no assurance that this provision will not be amended or eliminated at some time in the future.

A small number of existing shareholders control our company, which could limit your ability to influence the outcome of shareholder votes.

Our trustees beneficially own approximately 54.5% of our common shares and approximately 44.6% of our total common shares and preferred shares, on an as-converted basis, as of October 1, 2026. As a result, these persons may be able to exercise significant influence over the outcome of shareholder votes, including votes concerning the election of trustees, the adoption or amendment of provisions in our declaration of trust or bylaws and the approval of mergers and other significant corporate transactions.

We are subject to the reporting requirements of the federal securities laws, which can be expensive.

We are a public reporting company in the United States and therefore, we are subject to the information and reporting requirements of the Securities Exchange Act of 1934 and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports and other information with the SEC will cause our expenses to be higher than they would be if we were a privately-held company.

The issuance or sale of equity, convertible or exchangeable securities in the market, or the perception of such future sales or issuances, could lead to a decline in the price, if any, of our common shares.

Our board of trustees has the authority to issue up to 400,000,000 common shares and 50,000,000 preferred shares of beneficial interest. Any issuance of equity or securities convertible into or exchangeable for our equity securities, including for the purposes of expansion of our business, may have a dilutive effect on our existing shareholders.

The perceived risk associated with the possible issuance of a large number of common shares or securities convertible into or exchange for a large number of common shares could cause some of our shareholders to sell their shares, thus causing the price of our shares to decline. Subsequent sales of common shares in the open market or the private placement of common shares or securities convertible into or exchangeable for common shares could also have an adverse effect on the market price, if any, of our common shares. If our common shares price declines, it may be more difficult for us to or we may be unable to raise additional capital.

We may conduct further equity offerings in the future. If common shares are issued in return for additional funds, property or services, the price per share could be lower than that paid by our current shareholders. Also, any capital stock we sell in the future may be valued on an arbitrary basis by us and the issuance of capital stock for future services, acquisitions, or other corporate actions may have the effect of diluting the value of the shares held by our existing shareholders.

Future sales of substantial amounts of our currently outstanding common shares in the public market, or the perception that such sales could occur, could adversely affect prevailing trading prices of our common shares and could impair our ability to raise capital through future offerings of equity or equity-related securities. We cannot predict what effect, if any, future sales of our common shares, or the availability of shares for future sales, will have on the market price of our common shares.

11

Because our shares are deemed “penny stock,” you may have difficulty selling them in the secondary trading market.

The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share. Additionally, if the equity security is not registered or authorized on a national securities exchange, the equity security also would constitute a “penny stock.” As our common shares fall within the definition of penny stock, these regulations require the delivery, prior to any transaction involving our common shares, of a risk disclosure schedule explaining the penny stock market and the risks associated with it. Disclosure is also required to be made regarding compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. In addition, monthly statements are required to be sent disclosing recent price information for the penny stocks. The ability of broker-dealers to sell our common shares and the ability of shareholders to sell our common shares in the secondary market may be limited. As a result, the market liquidity for our common shares may be severely and adversely affected. We can provide no assurance that trading in our common shares will not be subject to these or other regulations in the future, which would negatively affect the market for our common shares.

Risks Related to Our Bankruptcy

As a result of our bankruptcy cases, we are subject to the risks and uncertainties associated with bankruptcy cases and operating under Chapter 11 may restrict our ability to pursue strategic and operational initiatives.

For the duration of our bankruptcy cases, our operations and our ability to execute our business strategy will be subject to the risks and uncertainties associated with bankruptcy. These risks include:

These risks and uncertainties could affect our business and operations in various ways. For example, transactions outside the ordinary course of business are subject to the prior approval of the bankruptcy court, which may limit our ability to respond timely to certain events or take advantage of opportunities.

In December 2025, the bankruptcy court in the jointly administered bankruptcy cases approved a settlement agreement between the plan agent and Whitestone REIT, Whitestone REIT Operating Partnership, L.P. and Whitestone TRS, Inc. settling the claims between us and the Whitestone parties and creating reserves for the payment of claims and the administration of the jointly administered bankruptcy estates. The Whitestone parties have asserted an interpretation of the agreement with which we disagree relating to whether ongoing distributions outside the scope of the agreement should be directed to Whitestone REIT Operating Partnership, L.P., and these disputes are ongoing. The bankruptcy court retains jurisdiction to enforce the settlement agreement or decide any claims or disputes that may arise or result from or be connected with the settlement agreement. Claims in the Whitestone Uptown Tower, LLC bankruptcy case were not settled as part of this agreement and remain outstanding as of the date of this report.

Because of the risks and uncertainties associated with the bankruptcy cases, we cannot predict or quantify the ultimate impact that events occurring during the bankruptcy process may have on our business, financial condition and results of operations, and there is no certainty as to our ability to continue as a going concern.

Prosecution of the bankruptcy cases has consumed and will continue to consume a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations.

While the bankruptcy cases continue our management will be required to spend a significant amount of time and effort focusing on the cases. This diversion of attention may materially adversely affect the conduct of our business, and, as a result, our financial condition and results of operations, particularly if the bankruptcy cases continue to be protracted. During the bankruptcy cases, our employees have faced considerable distraction and uncertainty. The failure to retain members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations.

12

We are in the process of Chapter 11 reorganization cases under the Bankruptcy Code, which may cause our common shares to decrease in value or may render our common shares worthless.

Following the commencement of the bankruptcy cases, the price of our common shares, Class A Cumulative Convertible Preferred Shares and Class C Convertible Preferred Shares may decrease in value or become worthless. Accordingly, any trading in our shares during the pendency of our bankruptcy cases is highly speculative and poses substantial risks to holders and purchasers of our shares. Recoveries in the bankruptcy cases for holders of shares, if any, will depend upon our ability to implement our plans of liquidation and reorganization, the treatment of claims under the plans and the value of our assets. We expect that shareholders would not receive a recovery through any plan unless the holders of more senior claims and interests, such as secured and unsecured indebtedness, are paid in full. We also expect our shareholders’ equity to decrease as we use cash on hand to support our operations in bankruptcy. We may not be able to implement a post-bankruptcy business plan. Consequently, there is a significant risk that the holders of our shares will receive no recovery under the bankruptcy cases and that our shares will be worthless.

Operating in bankruptcy for a long period of time may harm our business.

Prolonged operations under bankruptcy court protection could have a material adverse effect on our business, financial condition, results of operations, and liquidity. So long as we remain subject to bankruptcy court protection or jurisdiction, senior management will be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on business operations. A prolonged period of operating under bankruptcy court protection also may continue to make it more difficult to retain management and other key personnel necessary to the success of our business.

In December 2025, the bankruptcy court in the jointly administered bankruptcy cases approved a settlement agreement between the plan agent and Whitestone REIT, Whitestone REIT Operating Partnership, L.P. and Whitestone TRS, Inc. settling the claims between us and the Whitestone parties and creating reserves for the payment of claims and the administration of the jointly administered bankruptcy estates. The bankruptcy court retains jurisdiction to enforce the settlement agreement or decide any claims or disputes that may arise or result from or be connected with the settlement agreement. Claims in the Whitestone Uptown Tower, LLC bankruptcy case were not settled as part of this agreement and remain outstanding as of the date of this report.

So long as we remain under bankruptcy court protection or jurisdiction, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the bankruptcy cases, including potentially the cost of litigation. In general, litigation can be expensive and time consuming to bring or defend against. Such litigation could result in settlements or damages that could significantly affect our financial results. It is also possible that certain parties will commence litigation with respect to the treatment of their claims under a Chapter 11 plan. It is not possible to predict the potential litigation that we may become party to, nor the final resolution of such litigation. The impact of any such litigation on our business and financial stability, however, could be material.

Item 1C. Cybersecurity.

Our board of trustees provides oversight of risks from cybersecurity threats, in coordination with our management team and the Audit Committee of the board.

The day-to-day management of cybersecurity is the responsibility of our executive officers, and our board of trustees relies on management, in particular our chief executive officer and chief financial officer, to bring significant matters impacting us to its attention, including with respect to material risks from cybersecurity threats. As a small company with few employees, we do not have employees with expertise in assessing and managing cybersecurity risks. We engage a third-party consultants to oversee and monitor our information technology security processes and implemented technologies.

Cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected us or our business strategy, results of operations or financial condition since the termination of our management agreements with Whitestone TRS. For a disclosure of our cybersecurity risks, see the risk factor under the heading “We face risks associated with security breaches through cyber attacks or cyber intrusions, as well as other significant disruptions of our information technology (“IT”) networks and related systems” in Risk Factors in Part I, Item 1A.

Item 2. Properties.

General Physical and Economic Attributes

As of December 31, 2025, we did not own any properties. Our principal executive office is located in leased facilities at 9825 E Bell Rd., Suite 130, Scottsdale, Arizona 85260. The rent under the lease is $2,700 per month, and the lease expires in November 2026.

Item 3. Legal Proceedings.

We may from time to time become a party to legal proceedings and claims that arise in the ordinary course of our business. These matters are generally covered by insurance. While the frequency and resolutions of any ordinary course matters cannot be predicted with certainty, we believe that occurrence and outcomes of these ordinary course matters will not have a material effect on our financial position, results of operations or cash flows. Other legal matters are discussed below.

13

Delaware Case

On July 12, 2022, we were named as a defendant in a lawsuit by Whitestone OP in a lawsuit styled Whitestone REIT Operating Partnership, L.P. v. Pillarstone Capital REIT, C.A. No. 2022-0607-LWW, in the Court of Chancery of the State of Delaware. The suit challenged our rights agreement, dated as of December 27, 2021 (as the same may be amended from time to time, the “Rights Agreement”), between us and American Stock Transfer & Trust Company, LLC, as rights agent, and claimed that our adoption of the Rights Agreement breached the Pillarstone OP Amended and Restated Agreement of Limited Partnership, and that we breached our fiduciary duties as general partner of Pillarstone OP to Whitestone OP and breached the implied covenant of good faith and fair dealing under the Amended and Restated Agreement of Limited Partnership.

On July 21, 2022, Whitestone OP filed a Motion to Preserve the Status Quo in the Delaware lawsuit requesting broad restrictions on our ability to conduct our business, including buying properties, enforcing the Rights Agreement, incurring expenses, or engaging in transactions. The Status Quo Order also prevented Whitestone OP from exercising its right under the Pillarstone OP Amended and Restated Agreement of Limited Partnership to require Pillarstone OP to redeem its OP Units. Our amended petition in the Texas lawsuit argued that Whitestone’s material breaches of contract and fiduciary duty operated to discharge and/or excuse any obligation to perform under the redemption provisions of the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

Representatives of our board of trustees attempted to initiate discussions to settle these matters in August 2022 with representatives of Whitestone’s board of trustees to avoid a prolonged, expensive legal fight. However, Whitestone was not open to settling these matters at that time or the other various times since August 2022 we attempted to initiate discussions to resolve these matters.

Whitestone indicated to us its intent to cause Whitestone OP to exercise its redemption right and stated publicly that it intended to monetize its investment in Pillarstone OP. We believed that if Whitestone were to be permitted to exercise its redemption right for cash amounts, we may not have the cash available to pay such amounts and may be required to sell one or more of our Real Estate Assets to satisfy this obligation, which may cause us to sell some or all of our Real Estate Assets at below fair market value and otherwise have a material adverse effect on our liquidity and financial condition and our ability to operate and improve our Real Estate Assets. We stated that a redemption request would not trigger the Rights Agreement, and our board of trustees had the sole discretion to interpret the Rights Agreement. However, Whitestone OP indicated that the Rights Agreement caused them to not exercise their redemption rights and claimed damages based on the alleged decline in the value of the Real Estate Assets following their failure to exercise the redemption rights.

Based on Whitestone’s performance under the management agreements and their public statements regarding their intentions for their interest in Pillarstone, we did not believe that Whitestone’s actions in connection with the exercise of the redemption rights would respect the rights of the holders of our common shares. The Pillarstone OP Amended and Restated Agreement of Limited Partnership expressly provides that in the event of a conflict between the interests of the limited partners (Whitestone OP as the sole limited partner) and our shareholders, we shall act in the interests of our shareholders, and we shall not be liable for monetary or other losses sustained, liabilities incurred or benefits not derived by the limited partners in connection therewith.

Our executive management team worked to restore normal operations and leasing activities quickly after Whitestone’s unanticipated termination of their managerial services. Many of our actions were affected by a lack of usable information being made available to us on a timely basis.

We discovered significant deferred maintenance and neglect of our assets had occurred under Whitestone’s management. Our efforts to address these matters were in some cases stymied by Whitestone’s litigation against us in Delaware where the court limited our ability to incur expenses above low threshold amounts for the types of expenses a company in our industry could expect to incur in the ordinary course of business. Our legal and professional fees increased substantially as we addressed the internalization of management and the litigation matters discussed in this report.

On July 17, 2023 and July 18, 2023, trial was held in the Delaware lawsuit. Post-trial argument in the lawsuit was held on October 18, 2023. Whitestone has asked the Delaware court to award damages of approximately $51,200,600 and post-judgement interest of $6,820,000 in the filing of its post-trial opening brief on August 28, 2023. On January 25, 2024, the Delaware court issued its opinion and determined that we breached the implied covenant of good faith and fair dealing without resolving the breach of contract or breach of fiduciary duty claims. Although Whitestone asked for monetary damages of $51,200,600 plus interest, the Delaware court declined to award damages. The Delaware court declared the Rights Agreement unenforceable against Whitestone, permitted Whitestone OP to tender a notice of redemption for its OP Units and determined that the Pillarstone OP limited partnership agreement should be followed whereby we would decide whether to assume Pillarstone OP’s redemption obligation and determine what value to attribute to Pillarstone OP’s assets. The Delaware court declared that any further relief must await future proceedings.

On January 25, 2024, Whitestone OP delivered its notice of redemption for all but one of its OP Units.

This case was settled pursuant to the settlement agreement described in “—Jointly Administered Bankruptcy Cases” below.

14

Houston Case

On September 16, 2022, we filed a lawsuit styled Pillarstone Capital REIT and Pillarstone Capital REIT Operating Partnership LP v. Whitestone TRS, Inc., Whitestone REIT, Whitestone REIT Operating Partnership, L.P., Cause No. 2022-59478, in the District Court, Harris County, Texas, 189th Judicial District alleging, among other things, breach of the Pillarstone OP limited partnership agreement and the management agreements for the Real Estate Assets by the Whitestone defendants and breach of fiduciary duties relating to Pillarstone OP by Whitestone OP going outside the role of limited partner and harming us and Pillarstone OP. A portion of the claims in this case were moved into an adversary proceeding by Whitestone Uptown Tower, LLC in the Uptown Tower bankruptcy case described in “—Uptown Tower” below, and the other claims were settled pursuant to the settlement agreement described in “—Jointly Administered Bankruptcy Cases” below.

Jointly Administered Bankruptcy Cases

On March 4, 2024, bankruptcy cases were filed for Pillarstone Capital REIT and Pillarstone OP, as well as Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, the subsidiaries owning our Real Estate Assets other than Uptown Tower. The bankruptcy cases were consolidated into the jointly administered bankruptcy cases styled In re: Whitestone Industrial-Office, LLC, et. al., Case No. 24-30653-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, the same court as, but separate cases from, the Whitestone Uptown Tower, LLC bankruptcy case described under “—Uptown Tower” below.

The plan of liquidation in the jointly administered bankruptcy cases providing for the sale of the Real Estate Assets other than Uptown Tower and treatment of claims was confirmed in November 2024. Those Real Estate Assets were sold to unrelated third party purchasers between October 2024 and July 2025.

The plan provided for a plan agent, and Frances A. Smith was appointed plan agent in the jointly administered bankruptcy cases. The plan agent was appointed for the purposes of administering all claims in the bankruptcy cases and making distributions to holders of allowed claims and equity interests under the plan of liquidation. The plan agent’s administration of the claims may include, without limitation, and pursuant to her reasonable business judgment, investigating, prosecuting, objecting to, resolving, reconciling, compromising, litigating, administering, and making distributions on account of, the claims.

The plan agent is not a trustee and does not participate in the management or operations of the debtors’ businesses, assets or financial affairs or the review and approval of the day-to-day operational expenses of the debtors’ business post-confirmation, unless the bankruptcy court determines cause exists for the plan agent to do so after notice and hearing.

The plan agent has the sole and exclusive authority to administer the claims, including the determination to compromise a claim involving Whitestone OP, any debtor or their affiliates or professionals, subject to notice and hearing and a party’s good-faith objection and the bankruptcy court’s final adjudication of the matter. The plan agent also has the authority to make demand on the debtors for funds necessary to satisfy allowed claims asserted against a debtor from that debtor’s funds (even if held by Pillarstone OP), which may include sales proceeds.

The plan agent is entitled to receive compensation as a flat fee of $10,000 per month, plus reimbursement of actual, necessary expenses. If during any month the plan agent spends more than fifteen (15) hours in the performance of her duties, she will be entitled to compensation at a rate of $650 per hour for each additional hour of services.

In December 2025 over our objections, the bankruptcy court issued an order approving an agreement between the plan agent and Whitestone REIT, Whitestone OP and Whitestone TRS settling the Whitestone claims in the jointly administered bankruptcy cases. The plan agent and Whitestone negotiated the settlement agreement without our participation. The bankruptcy court’s order and the settlement agreement provided for, among other things:

15

Whitestone Uptown Tower, LLC was not party or subject to the settlement, and the litigation in its bankruptcy case was not resolved under the settlement. The Whitestone parties have asserted an interpretation of the agreement with which we disagree relating to whether ongoing distributions outside the scope of the agreement should be directed to Whitestone OP, and these disputes are ongoing.

In July 2026, a subsidiary of Ares Management Corporation acquired Whitestone REIT in a merger transaction, constituting a Change of Control under the Contribution Agreement. As a result, Pillarstone OP repurchased the last remaining OP Unit held by Whitestone OP for an aggregate repurchase price of $1.34 in August 2026, the funds for which were advanced by us.

Uptown Tower

Whitestone Uptown Tower, LLC, Pillarstone OP’s subsidiary that owned the Uptown Tower office building, was the borrower under a loan agreement. The Uptown Tower office building was subject to a mortgage under the loan agreement. The mortgage debt was guaranteed by Whitestone OP. This mortgage was an obligation of Whitestone Uptown Tower, LLC, a subsidiary included in our consolidated financial statements until its deconsolidation in December 2023. Neither Pillarstone Capital REIT nor Pillarstone OP had any obligation or guarantee of this indebtedness nor did any of our other properties collateralize this indebtedness.

16

Prior to the October 2023 maturity of the mortgage loan, the borrower was not in compliance with loan covenants requiring timely filing of financial information to the lender for the mortgage loan. In addition, the lender asserted that Whitestone’s termination of the management agreement for Uptown Tower also caused an event of default under the loan agreement.

In July 2023, Rialto Capital Advisors, LLC, the special servicer for the mortgage loan, implemented a cash sweep and began to seize the funds from the operations of the Uptown Tower property under the cash management agreement relating to the mortgage loan. Prior to Rialto Capital Advisors, LLC’s seizing the funds from those operations, those funds had been used for the operation and maintenance of the Uptown Tower property, with excess funds used for the operations of Pillarstone OP and the General Partner. We did not have an alternate source of funds for the operation of Uptown Tower.

On August 3, 2023, we received a notice of the default of the mortgage loan from counsel for the lender and Rialto Capital Advisors, LLC. The default notice asserted non-monetary defaults resulting from Whitestone’s failure to comply with the loan agreement in connection with the Contribution Agreement in 2016. The default notice also alleged a non-monetary default caused by Whitestone’s termination of its management agreement for Uptown Tower in August 2022.

In the default notice, the lender and special servicer noted that the borrower, prior to the Contribution Agreement and while it was controlled by Whitestone OP, represented, warranted, and covenanted that “[F]ollowing the Transfer, Sponsor [Whitestone REIT] through its ownership of Guarantor [Whitestone OP] [. . .] shall continue to Control Borrower [Whitestone Uptown Tower, LLC], and shall continue to control the day-to-day operation of the Property.” The lender and special servicer contend that this representation was false because Pillarstone OP and the borrower are controlled by the general partner (Pillarstone Capital REIT, the sole general partner of Pillarstone OP) and not Whitestone REIT.

As the 2016 alleged defaults occurred while Whitestone was in control of all loan parties and we believe Whitestone caused the 2022 default through its unilateral termination of the management agreement for Uptown Tower, we are not in a position to agree with or dispute the determination of the alleged defaults or Whitestone OP’s liability under its guaranty, or any further effect they may have on the borrower or the Uptown Tower property.

The borrower requested disbursements of capital and operating expenditures from Rialto Capital Advisors, LLC under the terms of the loan agreement in August 2023 and September 2023, but Rialto Capital Advisors, LLC did not release the funds and indicated that it did not intend to release funds or reverse the cash sweep to permit the funding of the operations and leasing of Uptown Tower.

The mortgage loan matured on October 1, 2023. The registrant and the borrower had been working to extend the maturity date and to find new financing or a buyer for the Uptown Tower property. When Whitestone learned of our negotiations with Rialto Capital Advisors, LLC to attempt to resolve this issue and believing we were intending to abandon the building, it filed a motion with the Delaware Court of Chancery asking the court for an order declaring that we shall not (a) stop managing the Uptown Tower, (b) “hand the keys” to Uptown Tower to the lender, or (c) otherwise abandon the Uptown Tower, which the court granted on a temporary basis on September 22, 2023. On October 19, 2023, Whitestone objected to a proposed sale of the Uptown Tower property under the Status Quo Order issued by the court in the previously disclosed lawsuit Whitestone OP instituted against us in the Delaware Court of Chancery.

On October 24, 2023, the lender delivered a notice of foreclosure sale to the borrower providing notice that, among other things, as of the maturity date, the borrower failed to repay all amounts due under the note, and making a demand on (1) the borrower and all persons and entities obligated on the promissory note evidencing the mortgage loan (except to the extent that the obligation is expressly limited by written contract or applicable law) for payment in full of the entire indebtedness, and on (2) the borrower for payment of rents and proceeds of any rents to which the lender is entitled under the mortgage loan documents and Texas Property Code chapter 64, Assignment of Rents to Lienholder. The notice of foreclosure sale also included a notice of foreclosure sale regarding the planned foreclosure sale of Uptown Tower on December 5, 2023.

On December 1, 2023, Whitestone Uptown Tower, LLC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership, Case No. 23-32832-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The filing of the petition constituted an event of default under the mortgage loan. Prior to the filing of the bankruptcy petition, in November 2023, representatives of our board of trustees attempted to initiate discussions with representatives of Whitestone REIT’s board of trustees to address these matters and to approach Rialto Capital Advisors, LLC jointly. However, without the borrower’s knowledge or consent, Whitestone attempted to pay off the loan and grant broad releases to the lender and special servicer on behalf of the borrower, including the application of the trapped cash, escrows and reserves to the indebtedness. No Whitestone REIT entity had the authority to make such agreements on behalf of the borrower, and we were informed that the agreement was not consummated, but Whitestone did send approximately $13.6 million to Rialto Capital Advisors, LLC pursuant to this arrangement.

17

On January 3, 2024, Rialto Capital Advisors, LLC provided a preliminary estimate of the payoff amounts for the Uptown Loan as of December 4, 2023. The estimated total amount due was listed as approximately $21.5 million, which included an outstanding principal balance of approximately $14.4 million, note interest of approximately $242,000 and default interest of approximately $6.6 million. In addition, Rialto was also holding approximately $2.6 million of trapped cash, escrows and reserves under the mortgage loan, which the borrower needed to operate the Uptown Tower property and pay its obligations, including then-upcoming property taxes. On January 31, 2024, the lender sued Whitestone OP to enforce Whitestone OP’s guaranty of the mortgage loan.

In June 2024, Whitestone Uptown Tower, LLC and Whitestone OP each settled with the lender. Whitestone Uptown Tower entered into a loan agreement with American Bank, N.A. for a loan amount of up to $1,500,000, secured by Uptown Tower and all of the other assets of Whitestone Uptown Tower. Whitestone Uptown Tower paid approximately $1.1 million to the prior lender, and the prior lender retained approximately $2.2 million of trapped cash and escrows from the cash sweep, which does not include portions of the tax escrow balance used to pay real estate taxes, and the approximately $13.6 million mistakenly sent to it by Whitestone OP in satisfaction of the prior mortgage loan.

The plan of reorganization in the Uptown Tower bankruptcy case, providing for the sale of Uptown Tower and treatment of claims, was confirmed in July 2024. We sold Uptown Tower in July 2025 for a purchase price of $20 million, or $17.3 million after deductions, closing costs and commissions and reimbursements to the seller, and paid off the American Bank, N.A. indebtedness.

Over the objection of Whitestone Uptown Tower, LLC, the bankruptcy court ruled in favor of Whitestone OP that it was statutorily subrogated to the secured claim of the lender of the mortgage loan with respect to its mistaken payment to the mortgage loan lender. Whitestone Uptown Tower, LLC paid $13.6 million of the Uptown Tower sale proceeds to Whitestone OP representing funds it had mistakenly paid to the prior mortgage lender for Uptown Tower when it attempted to pay off the mortgage loan without informing us and without authority to do so. On October 25, 2024, Whitestone Uptown Tower, LLC also appealed that ruling in the United States District Court for the Northern District of Texas, Dallas Division, in the case styled Whitestone Uptown Tower, LLC v. Whitestone REIT Operating Partnership, L.P., Case No. 24-02699. The District Court affirmed the bankruptcy court ruling, and Whitestone Uptown Tower, LLC appealed the District Court’s ruling to the United States Court of Appeals for the Fifth Circuit on August 13, 2025. On September 4, 2026, the Court of Appeals affirmed the District Court’s ruling. On September 18, 2026, Whitestone Uptown Tower, LLC filed a petition with the Court of Appeals for a rehearing en banc, which was denied on October 5, 2026.  Whitestone Uptown Tower, LLC is considering its available options in this matter.

On June 4, 2025, Whitestone Uptown Tower filed an adversary proceeding in its bankruptcy case styled Whitestone Uptown Tower, LLC v. Whitestone REIT, Whitestone REIT Operating Partnership L.P. and Whitestone TRS, Inc., Adv. Proc No. 25-03061, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division for breach of contract and breach of fiduciary duties related to the management of Uptown Tower under the management agreements as discussed under “—Houston Case” above. This case remains ongoing as of the date of this report.

The Uptown Tower bankruptcy proceedings have been and are expected to continue to be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of these proceedings are difficult to predict. In addition, we intend to vigorously pursue the Uptown Tower action to seek damages from Whitestone due to its violations of the management agreements and fiduciary duties and to protect our shareholders. However, the outcomes of these proceedings, including the timing of the final disposition of the proceedings, are unpredictable and could result in substantial costs to us and affect our ability to recover funds from Whitestone Uptown Tower, LLC. As a result, future adverse rulings, settlements, or unfavorable developments could result in a material adverse effect on the registrant’s business, results of operations or financial condition.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

Market Information

There is no established public trading market for the common shares. Only a sporadic and highly limited market exists for our common shares, particularly as we have been delinquent in filing our annual and quarterly reports under the Exchange Act. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Our common shares are not on an exchange but are quoted on the Expert Market of the OTC Markets Group (the "Expert Market") with the symbol "PRLEQ".

The number of holders of record of our common shares was 97 as of March 31, 2026, and we estimate we have approximately 250 beneficial holders of common shares as of that date. As of October 1, 2026, we had 657,084 common shares of beneficial interest outstanding.

18

The following table sets forth the quarterly high and low sale prices per share of our common shares for the years ended December 31, 2025 and 2024 as reported on the Expert Market, where the common shares were quoted as of those dates. The quotations shown represent inter-dealer prices without adjustment for retail markups, markdowns or commissions, and may not reflect actual transactions.

On July 27, 2026, the date of the most recent unsolicited customer offer shown on the Expert Market, the offer price for our common shares was $0.05 per share.

Our Class A Cumulative Convertible Preferred Shares ("Class A Preferred Shares") are quoted on the Expert Market with the symbol "PRLPQ". The number of holders of record of our Class A Preferred Shares is two, and there have not been any transactions in these shares in the last two years. Class A Preferred shareholders have the right to convert their shares into common shares as follows: 95,226 Class A Preferred Shares are each convertible into 0.046 common shares and 161,410 Class A Preferred Shares are each convertible into 0.305 common shares.

Our Class C Convertible Preferred Shares ("Class C Preferred Shares") were issued effective September 29, 2006 to the trustees of the Company who contributed cash and/or services for these shares. The Class C Preferred Shares are not quoted on an exchange or the Expert Market.

Dividend Policy

We do not anticipate paying dividends on our common shares in the foreseeable future. Declaration or payment of dividends, if any, in the future, will be at the discretion of the board of trustees and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the board of trustees.

Issuer Purchases of Equity Securities

The Company did not purchase any of its equity securities in 2025.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

On December 1, 2023, Whitestone Uptown Tower, LLC, an indirect subsidiary of Pillarstone Capital REIT (the “Company,” “Pillarstone,” “we,” “our,” or “us”), filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership, Case No. 23-32832-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

On March 4, 2024, bankruptcy cases were filed by Pillarstone OP, as well as Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, the subsidiaries owning our Real Estate Assets other than Uptown Tower, which were consolidated into the jointly administered cases styled In re: Whitestone Industrial-Office, LLC, et. al., Case No. 24-30653-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

As a result of these bankruptcy filings, as required under U.S. GAAP, we deconsolidated the bankrupt subsidiaries from our consolidated financial statements effective with their bankruptcy filings. We previously deconsolidated Whitestone Uptown Tower, LLC effective with its bankruptcy filing on December 1, 2023.

The financial condition and results of operations of the bankrupt subsidiaries are presented as discontinued operations in our consolidated financial statements for periods presented before the deconsolidations.  

19

Overview

We are a Maryland real estate investment trust ("REIT") engaged in investing in, owning and operating commercial properties. As of December 31, 2025, we owned all of the equity of Pillarstone Capital REIT Operating Partnership LP (“Pillarstone OP”), our operating partnership, and serve as its general partner. Substantially all of our operations and activities have been conducted for the benefit of and through Pillarstone OP. As of December 31, 2025, all of the Real Estate Assets owned by subsidiaries of Pillarstone OP have been sold pursuant to the plans of liquidation and reorganization as part of bankruptcy filings made by us and each of our subsidiaries.

History

Pillarstone was formed on March 15, 1994 as a Maryland REIT. We operated as a traditional REIT by buying, selling, owning and operating commercial and residential properties through December 31, 1999. In 2000, we purchased a software technology company, resulting in our not meeting the qualifications to be a REIT under the Code. In 2002, we discontinued the operations of the technology segment, and from 2003 through 2006, pursued a value-added business plan primarily focused on acquiring well located, under-performing multifamily residential properties, including affordable housing communities, and repositioning them through renovation, leasing, improved management and branding. From 2006 until December 2016, we continued our existence as a corporate shell current in our SEC filings.

On December 8, 2016, Pillarstone and Pillarstone OP entered into the Contribution Agreement with Whitestone OP, a subsidiary and the operating partnership of Whitestone REIT, both of which were related parties to us and Pillarstone OP, pursuant to which Whitestone OP contributed to Pillarstone OP all of the equity interests in four of its wholly-owned subsidiaries that owned 14 real estate assets (the "Real Estate Assets") for aggregate consideration of approximately $84 million, consisting of (1) approximately $18.1 million of Class A units representing limited partnership interests in Pillarstone OP issued at a price of $1.331 per OP Unit; and (2) the assumption of approximately $65.9 million of liabilities by Pillarstone OP (collectively, the “Acquisition”). Whitestone OP was the 81.4% limited partner of Pillarstone OP following the transaction.

In connection with the Contribution Agreement, on December 8, 2016, we entered into management agreements with Whitestone TRS, Inc., a subsidiary of Whitestone (“Whitestone TRS"). Pursuant to the management agreements, Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services to such properties in exchange for monthly property and asset management fees.

On July 19, 2022, we received written notice that Whitestone TRS confirmed termination of the management agreements for the Real Estate Assets. We had previously communicated to Whitestone our plan to internalize the management of the Real Estate Assets, but we had not made efforts to terminate the management agreements. However, Whitestone TRS stated in its notice letter that while it had not received written notice of the termination of the management agreements, it “confirms receipt of your intent to terminate, and hereby confirms termination of the Agreements effective 30 days from” July 19, 2022. The management agreements provided that “Unless otherwise terminated pursuant to the provisions hereof, the term of this Agreement shall automatically renew on a month to month basis at the end of the term unless either of the Parties has notified the other in writing not less than thirty (30) days prior to the expiration of the term, as the same may be extended.”

Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe. The management agreements provided for Whitestone TRS to provide such services, or in certain cases contracting with other providers to perform such services, as:

We worked diligently to restore normal operations and leasing activities following Whitestone’s unanticipated termination of its managerial services. Many of our actions were affected by a lack of usable information made available to us by Whitestone on a timely basis. Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe, particularly as Whitestone OP owned 81.4% of Pillarstone OP as a non-controlling limited partner.

20

Whitestone’s 30-day notice period of termination was insufficient. Whitestone did not cooperate with us to provide for an orderly transition of its contracted responsibilities. The services under the management agreements were extensive and material to the operation of Pillarstone’s business and our accounting and financial reporting. The management functions, as operated by Whitestone, were deeply co-mingled with Whitestone’s management functions for its own business. As a result, Pillarstone was materially and adversely affected by Whitestone’s abrupt termination of the management agreements, its incomplete and inadequate delivery of books and records and other materials required to be delivered under the management agreements, and the failure to provide for an appropriate transition. We had no way to continue our accounting and financial reporting responsibilities as a public company. For several months following the abrupt termination of services by Whitestone, we were unable to systematically invoice our tenants and pursue collection of delinquent accounts as an independent, internally-managed company. In addition, several vendor service contracts were tied to Whitestone and the pricing of services was based on the combination of Pillarstone and Whitestone. The transition caused us to obtain separate services, which caused delays in our business operations and higher costs. In other cases, Whitestone obligated us to long-term contracts for essential services that we cannot easily replace.

Specifically, Whitestone:

Within days after the termination of the management agreements by Whitestone, we internalized management and began to manage our Real Estate Assets and our business without an external management company. Our board of trustees immediately hired an experienced executive management team with prior experience working with our property portfolio and our leadership team quickly began:

We selected an enterprise resource planning, or ERP, system of our own and began implementation which continued into 2023. Our leadership team quickly engaged consultants (a) to assist us in implementing the newly selected ERP system, (b) to analyze, reconcile and transform historical data obtained from Whitestone into a usable format for our new system and (c) to design procedures for regular accounting closes and preparation of accurate and reliable financial statements for our shareholders and other stakeholders. While this process has been underway, we have been directing the maintenance and operations of the Real Estate Assets and taking steps available to us to address the significant deferred maintenance and neglect of our assets which occurred while under Whitestone’s management.

21

Lawsuits, Bankruptcy Proceedings and Sale of Our Properties

On July 12, 2022, we were named as a defendant in a lawsuit by Whitestone OP in a lawsuit styled Whitestone REIT Operating Partnership, L.P. v. Pillarstone Capital REIT, C.A. No. 2022-0607-LWW, in the Court of Chancery of the State of Delaware. The suit challenged our rights agreement, dated as of December 27, 2021 (as the same may be amended from time to time, the “Rights Agreement”), between us and American Stock Transfer & Trust Company, LLC, as rights agent, and claimed that our adoption of the Rights Agreement breached the Pillarstone OP Amended and Restated Agreement of Limited Partnership, and that we breached our fiduciary duties as general partner of Pillarstone OP to Whitestone OP and breached the implied covenant of good faith and fair dealing under the Amended and Restated Agreement of Limited Partnership.

On July 21, 2022, Whitestone OP filed a Motion to Preserve the Status Quo in the Delaware lawsuit requesting broad restrictions on our ability to conduct our business, including buying properties, enforcing the Rights Agreement, incurring expenses, or engaging in transactions. The Status Quo Order also prevented Whitestone OP from exercising its right under the Pillarstone OP Amended and Restated Agreement of Limited Partnership to require Pillarstone OP to redeem its OP Units. Our amended petition in the Texas lawsuit argued that Whitestone’s material breaches of contract and fiduciary duty operated to discharge and/or excuse any obligation to perform under the redemption provisions of the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

Representatives of our board of trustees attempted to initiate discussions to settle these matters in August 2022 with representatives of Whitestone’s board of trustees to avoid a prolonged, expensive legal fight. However, Whitestone was not open to settling these matters at that time or the other various times since August 2022 we attempted to initiate discussions to resolve these matters.

Whitestone indicated to us its intent to cause Whitestone OP to exercise its redemption right and stated publicly that it intended to monetize its investment in Pillarstone OP. We believed that if Whitestone were to be permitted to exercise its redemption right for cash amounts, we may not have the cash available to pay such amounts and may be required to sell one or more of our Real Estate Assets to satisfy this obligation, which may cause us to sell some or all of our Real Estate Assets at below fair market value and otherwise have a material adverse effect on our liquidity and financial condition and our ability to operate and improve our Real Estate Assets. We stated that a redemption request would not trigger the Rights Agreement, and our board of trustees had the sole discretion to interpret the Rights Agreement. However, Whitestone OP indicated that the Rights Agreement caused them to not exercise their redemption rights and claimed damages based on the alleged decline in the value of the Real Estate Assets following their failure to exercise the redemption rights.

Based on Whitestone’s performance under the management agreements and their public statements regarding their intentions for their interest in Pillarstone, we did not believe that Whitestone’s actions in connection with the exercise of the redemption rights would respect the rights of the holders of our common shares. The Pillarstone OP Amended and Restated Agreement of Limited Partnership expressly provides that in the event of a conflict between the interests of the limited partners (Whitestone OP as the sole limited partner) and our shareholders, we shall act in the interests of our shareholders, and we shall not be liable for monetary or other losses sustained, liabilities incurred or benefits not derived by the limited partners in connection therewith.

On September 16, 2022, we filed a lawsuit styled Pillarstone Capital REIT and Pillarstone Capital REIT Operating Partnership LP v. Whitestone TRS, Inc., Whitestone REIT, Whitestone REIT Operating Partnership, L.P., Cause No. 2022-59478, in the District Court, Harris County, Texas, 189th Judicial District alleging, among other things, breach of the Pillarstone OP limited partnership agreement and the management agreements for the Real Estate Assets by the Whitestone defendants and breach of fiduciary duties relating to Pillarstone OP by Whitestone OP going outside the role of limited partner and harming us and Pillarstone OP. A portion of the claims in this case were moved into an adversary proceeding by Whitestone Uptown Tower, LLC in the Uptown Tower bankruptcy case described in Item 3, “Legal Proceedings—Uptown Tower”, and the other claims were settled pursuant to the settlement agreement described in Item 3, “Legal Proceedings—Jointly Administered Bankruptcy Cases.”

Our executive management team worked to restore normal operations and leasing activities quickly after Whitestone’s unanticipated termination of their managerial services. Many of our actions were affected by a lack of usable information being made available to us on a timely basis.

We discovered significant deferred maintenance and neglect of our assets had occurred under Whitestone’s management. Our efforts to address these matters were in some cases stymied by Whitestone’s litigation against us in Delaware where the court limited our ability to incur expenses above low threshold amounts for the types of expenses a company in our industry could expect to incur in the ordinary course of business. Our legal and professional fees increased substantially as we addressed the internalization of management and the litigation matters discussed in this report.

On July 17, 2023 and July 18, 2023, trial was held in the Delaware lawsuit. Post-trial argument in the lawsuit was held on October 18, 2023. Whitestone has asked the Delaware court to award damages of approximately $51,200,600 and post-judgement interest of $6,820,000 in the filing of its post-trial opening brief on August 28, 2023. On January 25, 2024, the Delaware court issued its opinion and determined that we breached the implied covenant of good faith and fair dealing without resolving the breach of contract or breach of fiduciary duty claims. Although Whitestone asked for monetary damages of $51,200,600 plus interest, the Delaware court declined to award damages. The Delaware court declared the Rights Agreement unenforceable against Whitestone, permitted Whitestone OP to tender a notice of redemption for its OP Units and determined that the Pillarstone OP limited partnership agreement should be followed whereby we would decide whether to assume Pillarstone OP’s redemption obligation and determine what value to attribute to Pillarstone OP’s assets. The Delaware court declared that any further relief must await future proceedings.

22

On January 25, 2024, Whitestone OP delivered its notice of redemption for all but one of its OP Units.

On March 4, 2024, bankruptcy cases were filed for Pillarstone Capital REIT and Pillarstone OP, as well as Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, the subsidiaries owning our Real Estate Assets other than Uptown Tower. The bankruptcy cases were consolidated into the jointly administered bankruptcy cases styled In re: Whitestone Industrial-Office, LLC, et. al., Case No. 24-30653-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, the same court as, but separate cases from, the Whitestone Uptown Tower, LLC bankruptcy case.

The plan of liquidation in the jointly administered bankruptcy cases providing for the sale of the Real Estate Assets other than Uptown Tower and treatment of claims was confirmed in November 2024. Those Real Estate Assets were sold to unrelated third party purchasers between October 2024 and July 2025.

The plan provided for a plan agent, and Frances A. Smith was appointed plan agent in the jointly administered bankruptcy cases. The plan agent was appointed for the purposes of administering all claims in the bankruptcy cases and making distributions to holders of allowed claims and equity interests under the plan of liquidation. The plan agent’s administration of the claims may include, without limitation, and pursuant to her reasonable business judgment, investigating, prosecuting, objecting to, resolving, reconciling, compromising, litigating, administering, and making distributions on account of, the claims.

The plan agent is not a trustee and does not participate in the management or operations of the debtors’ businesses, assets or financial affairs or the review and approval of the day-to-day operational expenses of the debtors’ business post-confirmation, unless the bankruptcy court determines cause exists for the plan agent to do so after notice and hearing.

The plan agent has the sole and exclusive authority to administer the claims, including the determination to compromise a claim involving Whitestone OP, any debtor or their affiliates or professionals, subject to notice and hearing and a party’s good-faith objection and the bankruptcy court’s final adjudication of the matter. The plan agent also has the authority to make demand on the debtors for funds necessary to satisfy allowed claims asserted against a debtor from that debtor’s funds (even if held by Pillarstone OP), which may include sales proceeds.

The plan agent is entitled to receive compensation as a flat fee of $10,000 per month, plus reimbursement of actual, necessary expenses. If during any month the plan agent spends more than fifteen (15) hours in the performance of her duties, she will be entitled to compensation at a rate of $650 per hour for each additional hour of services.

In December 2025, the plan agent and Whitestone REIT, Whitestone OP and Whitestone TRS entered into a settlement agreement discussed in “—Liquidity and Capital Resources” below.

In October 2024, our subsidiary owning the 9101 LBJ Freeway property sold it for a purchase price of $5,753,000, or approximately $5.1 million after deductions, closing costs and commissions.

In October 2024, our subsidiary owning the Interstate 10 Warehouse property sold it for a purchase price of $8,400,000, or approximately $8.1 million after deductions, closing costs and commissions.

In February 2025, our subsidiary owning the Corporate Park Woodland II property sold it for a purchase price of $1,650,000, or approximately $1.56 million after deductions, closing costs and commissions.

In July 2025, our subsidiary owning the Uptown Tower property sold it for a purchase price of $20,000,000, or approximately $17.3 million after deductions, closing costs and commissions.

In July 2025, in a series of related transactions, the subsidiaries owning the remaining Real Estate Assets sold them as follows:

23

These sales were completed pursuant to the plan of liquidation in the jointly administered bankruptcy cases and the Whitestone Uptown Tower plan of reorganization. We are considering our strategic plans following the outcome of the proceedings in the bankruptcy cases.

Results of Operations

The following discussion of our results of operations should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report.

Comparison of the Years Ended December 31, 2025 and 2024

The following provides a comparison of our results of operations (dollars in thousands):

(1) Excludes the Uptown Tower property.  Whitestone Uptown Tower, LLC, Pillarstone OP’s subsidiary which owned the Uptown Tower property, was deconsolidated in December 2023 and is presented as discontinued operations for periods before its deconsolidation.

(2) Excludes Pillarstone OP, as well as Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, which were deconsolidated in March 2024  and are presented as discontinued operations for periods before their deconsolidation.

Revenues. We had no revenues for the years ended December 31, 2025 and 2024. All of our revenue producing activities were conducted in subsidiaries which have been deconsolidated because of their bankruptcy filings.

Expenses. Our operating expenses were $439 thousand for the year ended December 31, 2025 compared to $288 thousand for 2024. The increase was primarily due to higher executive compensation between periods. In 2025, we recorded reimbursements from Pillarstone OP totaling $671 thousand for operating and administrative expenses. We receive these reimbursements at the time we expend cash for allowable expenses. In the same period of 2024, we recorded reimbursements totaling $229 thousand.

Other income for 2024 principally includes a gain of $864 thousand on the deconsolidation of Pillarstone OP and its subsidiaries.

Our effective tax rate for the years ended December 31, 2025 and 2024 was 0% and 87%, respectively. In 2024, we recognized a 100% valuation allowance against our net deferred tax assets because of the deconsolidation of our remaining subsidiaries that had operations. We had no current tax obligations in 2025 and the valuation allowance remained in place.

Income from Discontinued Operations. The financial condition and results of operations of the deconsolidated subsidiaries were presented as discontinued operations in our consolidated financial statements for periods presented before their deconsolidation. For 2024, we reported income from discontinued operations of $81 thousand. The March 31, 2024 period was the last period before the final deconsolidation.

Noncontrolling interest in subsidiary represents the share of earnings of Pillarstone OP allocable to holders of partnership interests other than us. There were no noncontrolling interests during the periods following the dates of deconsolidation.

24

Liquidity and Capital Resources

As of December 31, 2025, our unrestricted cash resources were $4.2 million.

Significant sources and uses of cash from continuing operations during 2025.

As required under U.S. GAAP, we deconsolidated our operating subsidiaries, Pillarstone OP, Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, from our consolidated financial statements effective with their bankruptcy filings on March 4, 2024. We previously deconsolidated Whitestone Uptown Tower, LLC effective with its bankruptcy filing on December 1, 2023. The financial condition and results of operations of the bankrupt subsidiaries are no longer presented in our consolidated financial statements after the effective date of their filings. For periods before the deconsolidation, our consolidated financial condition and results of operations include those of the deconsolidated subsidiaries as discontinued operations.

Expense Reimbursements. Under the Pillarstone OP Amended and Restated Agreement of Limited Partnership, Pillarstone OP was responsible for all expenses relating to its organization, the ownership of its assets and its operations. It is also responsible for the administrative and operating costs and expenses incurred by Pillarstone Capital REIT as its General Partner, including, without limitation, all expenses relating to the General Partner’s (i) continued existence and subsidiary operations, (ii) offerings and registration of securities, (iii) preparation and filing of any periodic or other reports and communications required under federal, state or local laws and regulations, (iv) compliance with laws, rules and regulations promulgated by any regulatory body, and (v) operating or administrative costs incurred in the ordinary course of business on behalf of Pillarstone OP; provided, however, that such costs and expenses shall not include any administrative or operating costs of the General Partner attributable to assets owned by the General Partner directly and not through Pillarstone OP or its subsidiaries. We have no assets, activities or operations other than those related to Pillarstone OP.

Indemnification provisions within the Pillarstone OP Amended and Restated Agreement of Limited Partnership also provides for indemnification by Pillarstone OP of all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts, arising from or in connection with any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, relating to Pillarstone OP or the General Partner or the operation of, or the ownership of property in which an indemnitee may be involved, or is threatened to be involved, unless a court of competent jurisdiction establishes that indemnification was not permitted under the circumstances described in the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

These reimbursement provisions provided us with critical sources of cash and liquidity to maintain our operations. Following Whitestone’s abrupt termination of managerial services to Pillarstone OP, we incurred significant costs to internalize management and to select and implement an enterprise-wide system of our own. We also incurred substantial legal costs in our litigation with Whitestone. We recorded reimbursements from Pillarstone OP totaling $671 thousand and $229 thousand in the years ended December 31, 2025 and 2024, respectively, for operating and administrative expenses incurred.

Indebtedness. The Company’s indebtedness at December 31, 2025 is presented in Item 8, “Financial Statements – Note 3 – Convertible Notes Payable”.

Indebtedness previously owed by Whitestone Uptown Tower, LLC under its mortgage loan for the Uptown Tower property was fully repaid in 2025 in connection with the sale of the property.

We had approximately $198,000 of convertible notes payable and corresponding accrued interest of approximately $200,000 as of December 31, 2025. The convertible notes payable were convertible by the noteholders into Common Shares at the rate of $1.331 per Common Share at any time. The commencement of our bankruptcy case constituted an event of default under the notes, pursuant to which all principal and accrued interest became automatically and immediately due and payable. In January 2026, we repaid the convertible notes including only interest accrued prior to the filing of the bankruptcy petition.

Long Term Liquidity and Operating Strategies.

Our consolidated financial statements have been prepared assuming that we will continue as a going concern. We have incurred significant losses and have an accumulated deficit of approximately $25.2 million as of December 31, 2025 and need to raise substantial amounts of additional funds to meet our obligations and afford us time to implement our business plan and resume profitable operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

25

Historically, we have financed our long-term capital needs, including acquisitions, as follows:

we were dependent on cash generated by our ownership of the Real Estate Assets to meet our liquidity needs. We have sold all of our Real Estate Assets pursuant to the plan of liquidation in the jointly administered bankruptcy cases and the Whitestone Uptown Tower plan of reorganization. Our debts have been repaid from the proceeds from the sales of our Real Estate Assets, including those of unsecured creditors subject to the Chapter 11 bankruptcy filings, which were repaid in December 2025 and January 2026.

In December 2025 over our objections, the bankruptcy court in the jointly administered bankruptcy cases issued an order approving an agreement between the plan agent and Whitestone REIT, Whitestone OP and Whitestone TRS settling the Whitestone claims in the jointly administered bankruptcy cases. The plan agent and Whitestone negotiated the settlement agreement without our participation. The bankruptcy court’s order and the settlement agreement provided for, among other things:

26

Whitestone Uptown Tower, LLC was not party or subject to the settlement, and the litigation in its bankruptcy case was not resolved under the settlement. The Whitestone parties have asserted an interpretation of the agreement with which we disagree relating to whether ongoing distributions outside the scope of the agreement should be directed to Whitestone OP, and these disputes are ongoing.

In July 2026, a subsidiary of Ares Management Corporation acquired Whitestone REIT in a merger transaction, constituting a Change of Control under the Contribution Agreement. As a result, Pillarstone OP repurchased the last remaining OP Unit held by Whitestone OP for an aggregate repurchase price of $1.34 in August 2026, the funds for which were advanced by us.

To implement our business strategy, additional capital will need to be raised. Our ability to access the capital markets will be dependent on a number of factors, including general market conditions and market perceptions about our Company. There can be no assurance that we will be able to raise capital, obtain debt financing, or improve operating results sufficiently to continue as a going concern, if at all. The consolidated financial statements included in this report do not include any adjustments that might result from the outcome of this uncertainty.

Interest Rates and Inflation

We were not significantly affected by rising interest rates during the periods presented in this report due primarily to having 100% of our debt with a fixed rate as of December 31, 2025. Any new indebtedness may be at higher rates than the 10% base rate of interest under our convertible note agreements. If we are not able to incur indebtedness on favorable terms to us, our business, financial condition, results of operations, or cash flows could be materially adversely affected.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have, or are likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP, which require us to make certain estimates and assumptions. The following section is a summary of certain estimates that both require our most subjective judgment and are most important to the presentation of our financial condition and results of operations. It is possible that the use of different estimates or assumptions in making these judgments could result in materially different amounts being reported in our consolidated financial statements.

Income taxes. We have not elected to be taxed as a REIT for federal income tax purposes. As such, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We are also subject to certain state and local income, excise and franchise taxes. The provision for state and local taxes has been reflected in the provision for income taxes in the consolidated statements of operations and has not been separately stated due to its insignificance.

27

Item 8. Financial Statements and Supplementary Data.

The required audited consolidated financial statements of the Company are included herein commencing on page F-1.

Item 9. Changes in and Disagreements with Accountants

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a 15(e) and 15d 15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") in ensuring that the information required to be disclosed in our filings under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including ensuring that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure.

Based on such evaluation, our principal executive and financial officers have concluded at a reasonable assurance level that such disclosure controls and procedures were not effective as of December 31, 2025.

Management’s Report on Internal Control Over Financial Reporting

In connection with the preparation of our annual consolidated financial statements, management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025, based on criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

Based on this assessment, the following material weaknesses have been identified:

Management has concluded that, based on applying the COSO criteria, as of December 31, 2025, our internal control over financial reporting was not effective to provide reasonable assurance of the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Remediation Plans. These material weaknesses arose because of Whitestone’s abrupt termination in August 2022 of managerial services they provided. At the date its managerial services ceased, we did not have our own personnel, processes or systems needed for proper accounting and financial reporting. While we immediately began to address these needs after Whitestone’s termination, we were unable to complete the design and implementation of appropriate internal control over financial reporting. These material weaknesses did not result in a material misstatement of our consolidated financial statements for the periods presented.

We have been working diligently on the process of designing and implementing effective internal control measures to remediate the reported material weaknesses. Our efforts include implementing a new enterprise-wide system that will help us in reducing reliance on manual processes and spreadsheets supporting the financial statements. This implementation was completed in 2023. We are using contract personnel for specialized accounting and financial reporting roles.

While we believe that these efforts will improve our internal control over financial reporting, our remediation efforts are ongoing and will require validation and testing of the design and operating effectiveness of internal controls. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the remaining material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weaknesses in our internal control over financial reporting.

28

Changes in Internal Control Over Financial Reporting

We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting, as described above. Our efforts to internalize management, establish new accounting and financial reporting processes and implement new systems have resulted in changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Except as otherwise described herein, there were no changes in our internal control over financial reporting that occurred during the three months ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Trustees, Executive Officers and Corporate Governance.

Trustees and Executive Officers

Our Board is divided into three classes with each class to be as nearly equal in number as possible and with trustees each serving for a three-year term. Our Board currently consists of five trustees.

The following table sets forth information for our current trustees and executive officers:

Each of the individuals listed above served in the positions listed above at the time of the filings of the bankruptcy petitions described in Part I, Item 3, “Legal Proceedings” in this report.

Class I Trustees:

James C. Mastandrea has been our Chairman since 2003 and served as our President and Chief Executive Officer from 2003 until July 2022. Mr. Mastandrea has over 40 years of experience in the real estate industry and 23 years serving in high level positions of publicly traded companies. From 2006 until January 2022, he served as the President, Chief Executive Officer and Chairman of the Board of Trustees of Whitestone REIT (NYSE), then a publicly traded REIT focused on Community Centered Properties™. In addition, since 1978, Mr. Mastandrea has served as the Chief Executive Officer/Founder of MDC Realty Corporation, a privately held residential and commercial real estate development company. From 1994 to 1998, Mr. Mastandrea served as Chairman and Chief Executive Officer of First Union Real Estate Investments (NYSE), a publicly traded real estate investment trust. Mr. Mastandrea also served in the U.S. Army from 1964 to 1966. In 2017, Mr. Mastandrea was recognized with the EY Entrepreneur of the Year Award for the Gulf Coast Texas Region in the Transformational CEO category. He regularly lectures to MBA students at the University of Chicago, has instructed as an Adjunct Professor in the MBA program at Rice University’s Jones Graduate School of Business in Houston, Texas, and has presented to institutional investors in the U.S. and Europe. Mr. Mastandrea’s significant experience in the commercial and residential real estate business, capital markets, and private and public companies as a real estate expert allows him to provide insight into various aspects of the economy and commercial real estate, which is of significant value to our Board.

29

Bradford D. Johnson has been our President and Chief Executive Officer since July 2022. Mr. Johnson has 40 years of experience in debt and equity capital markets, portfolio asset management and commercial development for domestic and international public and private REITs, pension funds and corporations with office, retail, industrial, senior living, student housing, multi-family apartments, and single-family rental operations in the U.S. Most recently, he served as Executive Vice President of Acquisitions and Asset Management for Whitestone REIT from 2010 to February 2022. Prior to Whitestone, Mr. Johnson held the positions of VP of Acquisitions and Development with Campus Living Villages Funds; Director of Finance & Capital Markets for Place Properties; Managing Director and CFO for Matrix Healthcare Development, Inc.; VP Development Manager for Robert Patillo Properties; and VP Asset & Portfolio Management, SE Region USA for Lendlease North America, formerly known as The Yarmouth Group Inc. Mr. Johnson began his career as an Associate Financial Analyst, Property Finance Group for LaSalle Partners, a predecessor firm of Jones Lang LaSalle, and Income Property Broker for Marcus & Millichap. Mr. Johnson holds a Bachelor of Arts degree from Baylor University with a concentration in Business. The Board determined that Mr. Johnson should serve as a trustee based on his appointment and position as President and Chief Executive Officer and his understanding of and experience in our markets and industry.

Class II Trustees:

John J. Dee served as our Senior Vice President, Chief Financial Officer, Secretary, and trustee from 2003 to July 2022, and continues his service to the Company as Secretary and trustee. From 2006 to February 2022, Mr. Dee was also Chief Operating Officer, Executive Vice President, and Corporate Secretary at Whitestone REIT (NYSE), then a publicly traded real estate investment trust (“REIT”) focused on Community Centered Properties™. Prior to Mr. Dee’s joining Pillarstone, from 2002 to 2003, he was Senior Vice President and Chief Financial Officer of MDC Realty Corporation, a privately held residential and commercial real estate development company. From 2000 to 2002, Mr. Dee was Director of Finance and Administration for a Cleveland, Ohio law firm. From 1978 to 2000, Mr. Dee held various management positions with First Union Real Estate Investments (NYSE), including Senior Vice President and Chief Accounting Officer from 1996 to 2000. Mr. Dee is licensed as a CPA (inactive status) in the State of Ohio. Mr. Dee has a significant number of years of experience with publicly listed real estate investment trusts and adds exceptional experience and skills to our management team and Board.

Class III Trustees:

Dennis H. Chookaszian has served as a trustee since June 2016. Mr. Chookaszian served as Chairman of the Financial Accounting Standards Advisory Council, which advises the Financial Accounting Standards Board, from January 2007 to December 2011. During his 27-year career with CNA Financial Corporation (“CNA”), Mr. Chookaszian held several management positions at CNA’s business unit and corporate levels. Mr. Chookaszian joined CNA in 1975 as Chief Financial Officer until 1990 when he became President. In 1992, he was named Chairman and Chief Executive Officer of CNA Insurance Companies, and in 1999 he became Chairman of CNA’s executive committee until he retired in 2001. Mr. Chookaszian has served on the board of Perdoceo Corporation, a private post-secondary education provider, since 2002. Mr. Chookaszian previously served on the boards of CME Group Inc. (formerly known as Chicago Mercantile Exchange Holdings Inc.), a U.S. financial exchange from 2004 to 2023. He also served as a director of publicly-held Allscripts Healthcare Solutions, Inc., a provider of clinical, financial, connectivity and information solutions and related professional services for hospitals, physicians and post-acute organizations, from September 2010 to May 2016; LoopNet, Inc., an information services provider to the commercial real estate industry, from July 2006 to April 2012; Maxar Technologies Ltd. (formerly known as MacDonald Dettwiler), a global communications and information company, from July 2005 to May 2019; Prism Technologies Group, Inc., an on-line insurance provider, from April 2003 to December 2017; and Sapient Corporation, a global services firm providing digital marketing and business and information technology services, from January 2003 to August 2007, in addition to numerous private company boards. In 2010, Mr. Chookaszian received the Outstanding Director Award from the Financial Times Outstanding Directors Exchange. Mr. Chookaszian is a member of the advisory board and an adjunct Professor at University of Chicago Booth School of Business where he teaches courses in corporate governance for more than the past five years. He also has taught a course in international corporate governance at Cheung Kong Graduate School of Business (China) and at Shanghai Advanced Institute of Finance (China). He also is a trustee of Northwestern University and a member of the advisory board of Kellogg Graduate School of Management. Mr. Chookaszian has a Bachelor of Science in chemical engineering from Northwestern University, a Master of Business Administration in finance from University of Chicago, and a Master’s degree in economics from London School of Economics. He is a Certified Public Accountant, Chartered Global Management Accountant, Certified Management Consultant, and Chartered Property Casualty Underwriter. Mr. Chookaszian has significant business, audit committee and teaching experience that adds significantly to the oversight and governance of the Company.

Kathy M. Jassem has served as a trustee since August 2018. From 2007 through December 2021 and from December 2023 to the present, Ms. Jassem has been employed by the New Jersey Division of Investment and has been Senior Portfolio Manager, managing $1 billion of domestic and global equity property portfolios. Ms. Jassem held the following NASD licenses: Series 7, 24, 63, 86 and 87. She earned a Bachelor of Science from Cornell University and an MBA degree from The Wharton School, University of Pennsylvania. She was a member of the NAREIT Advisory Council from 2018 to 2022. Ms. Jassem has extensive experience in real estate investments and maintains regular contact with real estate investment professionals and analysts providing the Board with a broad base of knowledge for current real estate investment trends.

30

Additional Executive Officers

Daniel P. Kovacevic has been our Chief Financial Officer since July 2022. Mr. Kovacevic has more than 40 years of experience in commercial and residential real estate as a developer and financial executive for public and private REITs and corporations with operations in the retail, multi-family residential, and single-family sectors. Prior to joining Pillarstone, Mr. Kovacevic was VP of Whitestone REIT, responsible for leasing and management of 2.4 million retail square feet from December 2011 to February 2022. His previous roles include Chief Financial Officer and Principal with the Mitroff Companies, a suburban Chicago homebuilder and commercial real estate business; VP-Finance with Midwest Development Corporation, a Chicago based real estate developer; and staff accountant with Coopers and Lybrand, now part of Price Waterhouse Coopers. Mr. Kovacevic was President of Homebuilders Association of Greater Chicago in 2006 and currently is serving his third term on Town of Fountain Hills Planning and Zoning Commission, where he has served since 2019, including as Chairman since 2025. He is a Certified Public Accountant (inactive) and holds a Bachelor of Science, Civil Engineering from Northwestern University, McCormick School of Engineering and a Master of Management, Finance and Accounting degree from Northwestern University, Kellogg Graduate School of Management.

William J. Carter was named Chief Operating Officer in July 2022. Mr. Carter has more than 40 years of experience in commercial real estate. Prior to joining Pillarstone, he was President and Owner of Columbia Capital LLC, which provides short-term bridge loans to real estate professionals since 2013. His previous experience includes serving as Group Vice President for Continental Illinois Bank with divisional responsibility for a $2 billion construction loan portfolio and managerial responsibility for 30 real estate professionals; CEO and President for Granada Construction Corporation, a regional apartment development company, where he developed more than 5,000 apartment units and sourced in excess of $300 million debt and equity capital; Managing Member for De Morgan Capital, a venture with a British pension fund to acquire real estate, source capital and provide advisory services; senior analyst for Real Estate Research Corporation, an international real estate consulting firm; and Executive Officer for Jupiter Realty, Major Realty and Brencor LLC. Mr. Carter holds a Bachelor of Business Administration degree from the University of Georgia.

Trustee Independence

Our common shares are currently quoted on the Expert Market of the OTC Markets Group. Accordingly, we are not subject to the rules of any national securities exchange that require a majority of a listed company’s trustees and specified committees of the board of trustees meet independence standards prescribed by such rules. However, the Board has affirmatively determined that each of Mr. Chookaszian and Ms. Jassem did not have a material relationship with Pillarstone Capital REIT that would interfere with the exercise of independent judgment and are “independent” as defined under NYSE MKT listing standards, applicable SEC rules and the standards prescribed by our declaration of trust.

Meetings and Committees of the Board

Our entire Board considers all major strategic decisions concerning our business.  Our Board has also established committees so that certain matters can be addressed in more depth than may be possible at a meeting of the entire Board.  Our Board has established a standing Nominating Committee, Audit Committee, and Management, Organization and Compensation Committee.

Our Board’s committee membership is as follows, with the “X” denoting the members of the respective committee:

Our Board has adopted a formal written charter for each committee. The charters are available on the Governance Documents page of our website at www.pillarstone-capital.org. The information contained on our website is not, and should not be considered, a part of this report. A copy of each charter is available to shareholders free of charge upon written request to the Company’s Secretary at: Pillarstone Capital REIT, Attention: Secretary, 9825 E Bell Rd., Suite 130, Scottsdale, Arizona 85260.

31

Audit Committee

We have a separately designated standing Audit Committee of the Board consisting of Mr. Chookaszian, who serves as Chairman, and Ms. Jassem. Mr. Chookaszian also serves as the audit committee financial expert, as defined by the SEC. Each member of the Audit Committee satisfies the independence standards and financial literacy requirements set forth under NYSE MKT listing standards and the applicable rules of the SEC. The Audit Committee is directly responsible for engaging and reviewing the performance of our independent public auditors, oversees our accounting and financial reporting processes, considers and approves the range of audit and non-audit fees, reviews the adequacy of our internal accounting controls and procedures and resolves disagreements between management and our independent public auditors.

Nominating Committee

Mr. Chookaszian is currently the sole member of the Nominating Committee. The Nominating Committee is responsible for identifying individuals qualified to become trustees and for evaluating potential or suggested trustee nominees. In order for an individual to qualify for nomination or election as a trustee, an individual, at the time of nomination, must have substantial expertise, experience or relationships relevant to the real estate business, which may include:

Additionally, an individual shall not have been convicted of a felony or sanctioned or fined for a securities law violation of any nature. The Nominating Committee in its sole discretion will determine whether a nominee satisfies the foregoing qualifications or possesses such other characteristics as deemed necessary by the Nominating Committee. Though we have no formal policy addressing diversity, the Nominating Committee will seek to recommend nominees to the Board that represent a diversity of experience, gender, race, ethnicity and age. Any individual who does not satisfy the qualifications above is not eligible for nomination or election as a trustee. The Nominating Committee performs a preliminary evaluation of potential candidates primarily based on the need to fill any vacancies on our Board, the need to expand the size of our Board and the need to obtain representation in key disciplines and/or market areas. The Nominating Committee will seek to identify trustee candidates based on input provided by a number of sources, including the Nominating Committee members and other members of our Board. The Nominating Committee also has the authority to consult with or retain advisors to carry out its duties, though it has not used a third party to locate or evaluate potential candidates for trustee. Once a potential candidate is identified as one who fulfills a specific need, the Nominating Committee performs a full evaluation of the potential candidate. This evaluation includes reviewing the potential candidate’s background information, relevant experience, willingness to serve, independence and integrity. In connection with this evaluation, the Nominating Committee may interview the candidate in person or by telephone. After completing its evaluation, the Nominating Committee makes a recommendation to the full Board as to the individuals who should be nominated by our Board. Our Board elects nominees recommended by the Nominating Committee to fill vacancies on our Board and nominates the nominees for election by shareholders after considering the recommendations and a report of the Nominating Committee. Due to the small size of the Company and the Board, the Nominating Committee does not have a policy with regard to the consideration of any director candidates recommended by security holders. In addition to the above process, as part of an agreement approved by shareholders in June 2003, Mr. Mastandrea can appoint five trustees to the Board provided he remains as our Chairman or Chief Executive Officer. Mr. Mastandrea has not exercised this right.

Nominations and Proposals By Shareholders.

For nominations or other business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the secretary of the Company and such other business must otherwise be a proper matter for action by the shareholders. To be timely, a shareholder’s notice shall set forth all information required under our Bylaws and shall be delivered to the secretary at our principal executive office not earlier than the 120th day nor later than 5:00 p.m., Central Time, on the 90th day prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the preceding year’s annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the 120th day prior to the date of such annual meeting and not later than 5:00 p.m., Central Time, on the later of the 90th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.

Such shareholder’s notice shall set forth:

32

A “shareholder associated person” of any shareholder means any person indirectly acting in concert with, such shareholder, any beneficial owner of shares beneficial interest of the Company owned of record or beneficially by such shareholder (other than a shareholder that is a depository) and any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such shareholder or shareholder associated person.

The foregoing description of our advance notice provisions is a summary and is qualified in its entirety by reference to the full text of our Bylaws, filed as Exhibit 3.2 to this report.

33

Risk Oversight

It is the responsibility of the Board to approve a strategic business plan and select a chief executive officer to execute the strategic plan. While the Board is tasked with the responsibility to detect potential high level risks, management is tasked with managing risk on a daily basis. Where possible, management, in conjunction with the Board, has defined high level risk controls to help mitigate the most significant risks to the Company.

The Management, Organization, and Compensation Committee oversees risks relating to our executive compensation plans and arrangements. The Audit Committee oversees the risks of financial reporting and compliance, including cybersecurity attacks and loss of confidential information. The Nominating Committee oversees risk related to independence of the Board and potential conflicts of interests. Management reports any observed or potential risks to each committee and to the Board members at their meetings.

Code of Conduct and Ethics

Our Board has adopted a Code of Conduct and Ethics that applies to all officers, trustees and employees of Pillarstone, including our principal executive officer, principal financial officer, principal accounting officer, and any person performing similar functions. We have posted our Code of Conduct and Ethics on the Governance Documents page of our website at www.pillarstone-capital.org. If we amend or grant any waiver from a provision of our Code of Conduct and Ethics, we will promptly disclose such amendment or waiver in accordance with and if required by applicable law, including by posting such amendment or waiver on our website at the address above.

Stock Trading Policies

Our Code of Conduct and Ethics provides that employees, officers and trustees may not buy or sell our shares when they are in possession of material, nonpublic information and are prohibited from passing on such information to others who might make an investment decision based on it. Employees, officers and trustees also may not trade in stocks of other companies about which they learn material, nonpublic information through the course of their employment or service. As a result of the small size of the company and our directors, officers and employees, we have not adopted a specific practice or policy regarding the ability of our employees (including officers) or directors, or any of their designees, to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our equity securities granted to the employee or director as part of the compensation of the employee or director or held, directly or indirectly, by the employee or director.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires the Company’s officers, trustees and persons who own more than 10% of our common shares to file reports of ownership and changes in ownership with the SEC. Officers, trustees and greater than 10% shareholders are required by regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of Form 4s filed by trustees reporting share transactions, grants of restricted shares and options furnished to us, or written representations that no Annual Statements of Beneficial Ownership of Securities on Form 5 were required to be filed, we believe that for the fiscal year ended December 31, 2025, all Section 16(a) filing requirements applicable to our officers, trustees and greater than 10% shareholders were complied with, other than delinquent Form 3s to be filed by Bradford D. Johnson, Daniel P. Kovacevic and William Carter.

Item 11. Executive Compensation.

The Management, Organization and Compensation Committee (the “Committee”) administers the compensation program for the executive officers. The Committee is responsible for reviewing and recommending our compensation and employee benefit policies to the Board for its approval and implementation. The Committee reviews and recommends to the Board for approval the compensation for our Chief Executive Officer, including salaries, bonuses and grants of awards under our equity incentive plans. The Committee and the Board review and act upon proposals by the Chief Executive Officer to determine the compensation for other executive officers. The Committee, among other things, reviews and recommends to the Board employees to whom awards will be made under our equity incentive plans, determines the number of options to be awarded, and the time, manner of exercise and other terms of the awards. Equity awards, including options, are not granted in anticipation of the release of material non-public information, and the release of material non-public information is not timed on the basis of option or equity grant dates.

The intent of the compensation program is to align the executive’s interests with that of our shareholders, while providing incentives and competitive compensation for implementing and accomplishing our short-term and long-term strategic and operational goals and objectives.

34

Summary Compensation Table

The following table sets forth the overall compensation earned by the named executive officers for the fiscal years ended December 31, 2025 and 2024 and each person who was a named executive officer during the year ended December 31, 2025.

In January 2025, we entered into an executive compensation agreement with Mr. Johnson, pursuant to which Mr. Johnson continues in his role and responsibilities as our Chief Executive Officer, President and Trustee, and Pillarstone OP will pay Mr. Johnson a base salary of (i) $20,000 per month for November 2024, December 2024 and January 2025, (ii) $16,000 per month thereafter through the earlier of the disposition of the Real Estate Assets in Houston and November 2025, unless extended by agreement with Whitestone OP; and (iii) $5,000 per month after the disposition of the Houston Real Estate Assets if Uptown Tower remains unsold, continuing until the earlier of the disposition of Uptown Tower and September 1, 2025. Mr. Johnson was entitled to a performance bonus of $150,000 if sales of all of the Houston Real Estate Assets closed by May 31, 2025 and $75,000 if a sale of Uptown Tower closed on or before May 31, 2025. The Real Estate Assets were sold between October 2024 and July 2025.

In connection with the administration of our bankruptcy case, we paid Mr. Johnson an aggregate of $403,125 in February 2026 for deferred compensation for the periods of July 2022 through October 2024. Following the sale of the Real Estate Assets, Mr. Johnson receives an hourly fee of $96.00 for services performed for us.

Restricted Share Agreements

Effective June 30, 2003, we issued 696,078 preferred shares valued at approximately $2.4 million to Messrs. Mastandrea and Dee pursuant to separate restricted share agreements for their services at that time as executive officers of the Company. On June 30, 2003, 534,668 preferred shares were converted at a factor of 0.305 into 163,116 common shares. Under the restricted share agreement for each of Mr. Mastandrea and Mr. Dee, the restricted shares vest upon the later of the following dates:

The Company has not vested any of the above shares. Even though the Company’s gross assets exceeded $50 million at times since the issuance of the shares, when considering its 18.6% ownership of Pillarstone OP, the Company’s effective ownership of gross assets was less than $50 million.

The number of common shares and the conversion factor have been revised to reflect the 1-for-75 reverse split of the common shares that occurred in July 2006.

35

Equity Compensation Plan Information

The table set forth below provides information as of December 31, 2025 with respect to compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance:

Compensation of Trustees

During 2020, the Management, Organization, and Compensation Committee recommended to the Board, and the Board approved, paying an annual trustee fee of $30,000 to each non-employee trustee in common shares from the 2016 Equity Plan approved by shareholders in 2016, with each trustee having the option to receive up to 50% in cash and the balance in common shares. Due to the Status Quo Order issued by the Court of Chancery of the State of Delaware in the Delaware lawsuit, the non-employee trustees could not be paid in common shares, a practice that continued following the bankruptcy case. The non-employee trustees earned trustee fees in 2025 as follows:

36

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.

The following table includes certain information as of October 1, 2026 with respect to the beneficial ownership of our shares by: (i) each person known by us to own more than 5% in interest of the outstanding shares; (ii) each of the trustees; (iii) each of our executive officers; and (iv) all of the trustees and executive officers as a group. Except as otherwise noted, the person or entity named has sole voting and investment power over the shares indicated.

37

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Under SEC rules for smaller reporting companies, a related person transaction is any transaction or any currently proposed transaction in which the Company was or is to be a participant, the amount involved exceeds the lesser of (i) $120,000 or (ii) 1% of the average of the Company’s total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest. A “related person” is a director, executive officer, or a more than 5% shareholder since the beginning of our last completed fiscal year, and their immediate family members.

Under our declaration of trust, we may enter into any contract or transaction with our trustees, officers, employees or agents (or any affiliated person), provided that in the case of any contract or transaction in which any of our trustees, officers, employees or agents (or any affiliated person) have a material financial interest (i) the fact of the interest is disclosed or known to the following: (a) the Board, and the Board shall approve or ratify the contract or transaction by the affirmative vote of a majority of disinterested trustees, even if the disinterested trustees constitute less than a quorum, or (b) the shareholders entitled to vote, and the contract or transaction is authorized, approved or ratified by a majority of the votes cast by the shareholders entitled to vote other than the votes of shares owned of record or beneficially by the interested party; or (ii) the contract or transaction is fair and reasonable to us. In addition, our Nominating Committee manages risks associated with the independence of the Board and potential conflicts of interest.

At December 31, 2025, we owed interest payable of approximately $100 thousand to trustees, which does not include approximately $51.7 thousand owed to the estate of Mr. Lambert, who served as our trustee until his death in November 2024 and approximately $48 thousand owed to another former trustee.

On December 8, 2016, we entered into the Contribution Agreement with Pillarstone OP and Whitestone OP, pursuant to which Whitestone OP contributed to Pillarstone OP all of the equity interests in four of its wholly-owned subsidiaries that owned 14 real estate assets for aggregate consideration of approximately $84 million, consisting of (1) approximately $18.1 million of Class A units representing limited partnership interests in Pillarstone OP issued at a price of $1.331 per OP Unit; and (2) the assumption of approximately $65.9 million of liabilities by Pillarstone OP. Pursuant to the Contribution Agreement, Whitestone OP became the 81.4% limited partner of Pillarstone OP. The terms of the Contribution Agreement were determined through arm's-length negotiations, were recommended to the board of trustees by a special committee of the board of trustees consisting solely of disinterested trustees of the Company and were approved by the full board.

In December 2025 over our objections, the bankruptcy court in the jointly administered bankruptcy cases issued an order approving an agreement between the plan agent and Whitestone REIT, Whitestone OP and Whitestone TRS settling the Whitestone claims in the jointly administered bankruptcy cases. Following our payment to Whitestone OP of approximately $33.4 million in December 2025 pursuant to the settlement agreement, Whitestone OP’s ownership in Pillarstone OP, then consisting of one OP Unit, no longer represented a majority interest of Pillarstone OP. In July 2026, a subsidiary of Ares Management Corporation acquired Whitestone REIT in a merger transaction, constituting a Change of Control under the Contribution Agreement. As a result, Pillarstone OP repurchased the last remaining OP Unit held by Whitestone OP for an aggregate repurchase price of $1.34 in August 2026, the funds for which were advanced by us.

38

Mr. Mastandrea, our Chairman and former Chief Executive Officer, also served as the Chairman and Chief Executive Officer of Whitestone REIT until January 18, 2022, and beneficially owned approximately 3.6% of the outstanding equity in Whitestone REIT (when calculated in accordance with Rule 13d-3(d)(1) under the Exchange Act).

Mr. Dee, then the Senior Vice President, Chief Financial Officer, and Secretary of the Company, also served as the Chief Operating Officer and Corporate Secretary of Whitestone REIT until February 9, 2022, and beneficially owned less than 1% of the outstanding equity in Whitestone REIT (when calculated in accordance with Rule 13d-3(d)(1) under the Exchange Act).

In January 2022, Whitestone REIT terminated, purportedly with cause, Mr. Mastandrea from his position as Chief Executive Officer of Whitestone REIT. In February 2022, Mr. Mastandrea filed suit against Whitestone REIT and certain of its trustees and officers in the District Court of Harris County, Texas, alleging claims relating to the termination of his employment and seeking up to $25 million in damages and equitable relief. This lawsuit is ongoing at the time of this report. In addition, Mr. Mastandrea is involved in ongoing divorce proceedings with Christine Krombeen Mastandrea, who was Whitestone’s Executive Vice President of Corporate Strategy at the time of Mr. Mastandrea’s termination, and was appointed as Whitestone REIT’s Chief Operating Officer and President thereafter.

On February 9, 2022, Whitestone REIT terminated Mr. Dee as its Chief Operating Officer and Mr. Johnson as its Executive Vice president of Acquisitions and Asset Management. Both Mr. Dee and Mr. Johnson have filed suit against Whitestone REIT in the District Court of Harris County, Texas alleging claims relating to the termination of their employment and breach of their respective employment agreements.

While we are not involved in those proceedings, we believe that these developments may impact our relationship with Whitestone.

Issuance of Convertible Notes to Trustees

In November 2015, five trustees serving on the Board of Pillarstone Capital at that time loaned funds to us, each pursuant to a Convertible Note Purchase Agreement (the “Agreement”). Pursuant to an Assignment and Assumption Agreement dated as of March 29, 2019 by and between Dennis Chookaszian Revocable Trust (“Mr. Chookaszian”) and a former trustee, and a Stock Purchase Agreement dated as of March 29, 2019 by and between Mr. Chookaszian and the same former trustee, Mr. Chookaszian acquired the Agreement and assumed the rights under the Note. With respect to other former trustees, Mr. DeVos was a trustee in November 2015 but did not stand for re-election in 2019 and continued to own his note payable as shown in the schedule below, and Mr. Lambert was a trustee in November 2015 until his death in November 2024.

The following individuals loaned the following face amounts that accrue interest at 10% per annum, as of December 31, 2025, as follows:

The convertible notes were callable by us after six months.

The convertible notes were issued effective November 20, 2015, had a maturity date of three years and had been extended multiple times. The commencement of our bankruptcy case constituted an event of default under the notes, pursuant to which all principal and accrued interest became automatically and immediately due and payable. In January 2026, we repaid the convertible notes including only interest accrued prior to the filing of the bankruptcy petition pursuant to our plan of liquidation and bankruptcy court proceedings in the following amounts:

39

Item 14. Principal Accountant Fees and Services.

The following table presents the aggregate fees billed for professional services rendered to us by M&K CPAS, PLLC for the fiscal years ended December 31, 2025 and 2024:

Pre-Approval Policies and Procedures

Before the independent auditors are engaged by us to render audit or permissible non-audit services, the Audit Committee approves the engagement. The Audit Committee also reviews the scope of any audit and other assignments given to our auditors to assess whether such assignments would affect their independence. The Audit Committee approved the payment by us of all fees billed to us by our principal accountant firms in 2025 and 2024.

40

PART IV

Item 15. Exhibits and Financial Statement Schedules.

41

42

(1)Indicates a management contract or compensatory plan or arrangement

Item 16. Form 10-K Summary.

None.

43

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Bradford D. Johnson, jointly and severally, his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

44

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee of Pillarstone Capital REIT

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Pillarstone Capital REIT (the Company) as of December 31, 2025 and 2024, and the related consolidated statements of operations, changes in equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company suffers from a lack of operations and has an accumulated deficit, each of which are factors that raise substantial doubt about its ability to continue as a going concern. Management’s plans to address these challenges are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Going Concern:

Due to factors such as lack of operations and having an accumulated deficit, the Company evaluated the need to include a going concern qualification in the consolidated financial statements. See discussion in Note 1.

Auditing management’s determination regarding the inclusion of a going concern qualification requires significant judgement given the fact that the Company uses management estimates of future revenues and expenses, as well as assumptions about future fundraising activity, which are not able to be substantiated.

To evaluate the appropriateness of the going concern qualification, we examined and evaluated the financial information, including management’s plans to mitigate the going concern qualification, and management’s disclosure on going concern.

/s/ M&K CPAS, PLLC

We have served as the Company’s auditor since 2025.

The Woodlands, TX

October 7, 2026

F-2

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Pillarstone Capital REIT and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share data)

The accompanying notes are an integral part of the consolidated financial statements.

F-3

Pillarstone Capital REIT and Subsidiaries

Consolidated Statements of Operations

(in thousands, except share and per share data)

The accompanying notes are an integral part of the consolidated financial statements.

F-4

Pillarstone Capital REIT and Subsidiaries

Consolidated Statements of Changes in Equity

(in thousands)

The accompanying notes are an integral part of the consolidated financial statements.

F-5

Pillarstone Capital REIT and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

The accompanying notes are an integral part of the consolidated financial statements.

F-6

Pillarstone Capital REIT

Notes to Consolidated Financial Statements

Pillarstone Capital REIT (the “Company,” “Pillarstone,” “we,” “our,” or “us”) is a Maryland real estate investment trust ("REIT") engaged in investing in, owning and operating commercial properties.

Liquidity and Financial Resources. On December 8, 2016, we and Pillarstone Capital REIT Operating Partnership LP (“Pillarstone OP”), entered into a Contribution Agreement (the “Contribution Agreement”) with Whitestone REIT Operating Partnership, L.P. (“Whitestone OP”), a subsidiary and the operating partnership of Whitestone REIT, both of which were related parties to Pillarstone and Pillarstone OP. Pursuant to the terms of the Contribution Agreement, Whitestone OP contributed to Pillarstone OP all of the equity interests in four of its wholly-owned subsidiaries (the “Subsidiaries”): Whitestone CP Woodland Ph. 2, LLC, a Delaware limited liability company; Whitestone Industrial-Office, LLC, a Texas limited liability company; Whitestone Offices, LLC, a Texas limited liability company; and Whitestone Uptown Tower, LLC, a Delaware limited liability company (“Uptown Tower”) that owned 14 real estate assets (the “Real Estate Assets” and, together with the Subsidiaries (the “Property”)), for aggregate consideration of approximately $84 million, consisting of (1) approximately $18.1 million of Class A units representing limited partnership interests in Pillarstone OP (“OP Units”), issued at a price of $1.331 per OP Unit; and (2) the assumption of approximately $65.9 million of liabilities by Pillarstone OP. Pursuant to the Contribution Agreement, Pillarstone became the general partner of Pillarstone OP with an equity ownership interest in Pillarstone OP totaling approximately 18.6% valued at $4.1 million as of the date of the Contribution Agreement. As the general partner of Pillarstone OP, we had the exclusive power to manage and conduct the business of Pillarstone OP, subject to certain customary exceptions.

At December 31, 2025, all of the Real Estate Assets owned by Pillarstone OP have been sold pursuant to the plans of liquidation and reorganization as part of bankruptcy filings made by Pillarstone and each of the entities we controlled.

Pursuant to the Contribution Agreement, Pillarstone agreed to file with the SEC on or prior to June 8, 2018, a shelf registration statement to register for sale under the Securities Act of 1933, as amended, the issuance of the common shares in the Company that may be issued upon redemption of the OP Units issued pursuant to the Contribution Agreement and the offer and resale of such common shares by the holders thereof. In addition, pursuant to the Contribution Agreement, in the event of a Change of Control (as defined therein), Pillarstone OP shall have the right, but not the obligation, to repurchase the OP Units issued thereunder from Whitestone OP at their initial issue price of $1.331 per OP Unit. Pillarstone and Whitestone agreed to extend the filing of the shelf registration statement to the date that the Company closes a public equity offering.

In connection with the Contribution Agreement, (1) with respect to each Real Estate Asset (other than the Real Property Asset owned by Uptown Tower), Whitestone TRS, Inc. (“Whitestone TRS”), a subsidiary of Whitestone, entered into a Management Agreement with Pillarstone OP who owns such Real Estate Asset and (2) with respect to Uptown Tower, Whitestone TRS entered into a Management Agreement with Pillarstone OP (collectively, the “Management Agreements”). Pursuant to the Management Agreements with respect to each Real Estate Asset (other than Uptown Tower), Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services to such Real Estate Asset in exchange for (x) a monthly property management fee equal to 5.0% of the monthly revenues of such Real Estate Asset and (y) a monthly asset management fee equal to 0.125% of gross asset value ("GAV") (as defined in each Management Agreement as, generally, the purchase price of the respective Real Estate Asset based upon the purchase price allocations determined pursuant to the Contribution Agreement, excluding all indebtedness, liabilities or claims of any nature) of such Real Estate Asset. Pursuant to the Management Agreement with respect to Uptown Tower, Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services to Pillarstone OP in exchange for (x) a monthly property management fee equal to 3.0% of the monthly revenues of Uptown Tower and (y) a monthly asset management fee equal to 0.125% of GAV of Uptown Tower. These activities were conducted by Whitestone TRS and Whitestone REIT using their own employees, processes, and systems and in some cases, third-party providers for services they sub-contracted to perform.

As a result of the Contribution Agreement, Whitestone OP owned approximately 81.4% and Pillarstone owned approximately 18.6% of the outstanding equity in Pillarstone OP.

On July 19, 2022, we received written notice that Whitestone TRS confirmed termination of the Management Agreements for the Real Estate Assets. We had previously communicated to Whitestone REIT our plan to internalize the management of our Real Estate Assets, but we had not made efforts to terminate the Management Agreements or transition the management activities. However, Whitestone REIT stated in its notice letter that while it had not received written notice of the termination of the Management Agreements, it “confirms receipt of your intent to terminate, and hereby confirms termination of the Agreements effective 30 days from” July 19, 2022.

F-7

Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe, particularly as Whitestone OP owned 81.4% of Pillarstone OP as a limited partner. As a result, we were materially and adversely affected by Whitestone’s abrupt termination of the Management Agreements, incomplete and inadequate delivery of books and records, our website and other materials required to be delivered under the Management Agreements, and the failure to provide for an appropriate transition. We had no way to continue our accounting and financial reporting responsibilities as a public company. Further, for several months following the abrupt termination of services by Whitestone, we were unable to systematically invoice our tenants and pursue collection of delinquent accounts.

Within days after the termination of the Management Agreements by Whitestone, we internalized management and began to manage the Real Estate Assets and our business without an external management company. This process involved commencing a selection process for an enterprise resource planning, or ERP, system of our own. We immediately hired an experienced management team with prior experience working with our property portfolio, including former Whitestone senior staff. Our newly assembled leadership team quickly engaged consultants (a) to assist us in implementing the newly selected ERP system, (b) to analyze, reconcile and transform historical data obtained from Whitestone REIT into a usable format for our new system and (c) to design procedures for regular accounting closes and preparation of accurate and reliable financial statements for our shareholders and other stakeholders.

In 2023, our work to restore operations that were disrupted by Whitestone’s abrupt termination as manager of our Real Estate Assets continued. In that time, we were working to extend the maturity date or to find new financing for mortgage indebtedness secured by our Uptown Tower office building or a buyer for the Uptown Tower property. The borrower, Whitestone Uptown Tower, LLC, Pillarstone OP’s subsidiary that owned the Uptown Tower office building, was not in compliance with loan covenants. These efforts were unsuccessful and soon after the mortgage’s maturity on October 1, 2023, the lender delivered a notice of foreclosure sale to the borrower.

On December 1, 2023, Whitestone Uptown Tower, LLC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership, Case No. 23-32832-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

On March 4, 2024, bankruptcy cases were filed for Pillarstone Capital REIT and Pillarstone OP, as well as Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, the subsidiaries owning our Real Estate Assets other than Uptown Tower, which were consolidated into the jointly administered bankruptcy cases styled In re: Whitestone Industrial-Office, LLC, et. al., Case No. 24-30653-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, the same court as, but separate cases from, the Whitestone Uptown Tower, LLC bankruptcy case.

In October 2024, Pillarstone OP sold 9101 LBJ Freeway for a purchase price of $5,753,000, or approximately $5.1 million after deductions, closing costs and commissions. In October 2024, Pillarstone OP sold Interstate 10 Warehouse for a purchase price of $8,400,000, or approximately $8.1 million after deductions, closing costs and commissions.

In February 2025, Pillarstone OP sold Corporate Park Woodland II for a purchase price of $1,650,000, or approximately $1.56 million after deductions, closing costs and commissions.

In July 2025, Pillarstone OP sold Uptown Tower for a purchase price of $20,000,000, or approximately $17.3 million after deductions, closing costs and commissions.

In July 2025, in a series of related transactions, Pillarstone OP sold:

These sales were completed pursuant to the plan of liquidation in the jointly administered bankruptcy cases and the Whitestone Uptown Tower plan of reorganization.

F-8

In December 2025, we received $4.05 million as part of the settlement in the jointly administered bankruptcies of Pillarstone OP, Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC. We expect no further settlements related to Pillarstone OP and its subsidiaries in the jointly administered bankruptcy cases. 

Going Concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. In addition to the events described above, we have incurred significant losses and have an accumulated deficit of approximately $25.2 million as of December 31, 2025 and need to raise substantial amounts of additional funds to meet our obligations and afford us time to implement our business plan and resume profitable operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

To implement our business strategy, additional capital will need to be raised. Our ability to access the capital markets will be dependent on a number of factors, including general market conditions and market perceptions about our Company. There can be no assurance that we will be able to raise capital, obtain debt financing, or improve operating results sufficiently to continue as a going concern, if at all. The consolidated financial statements included in this report do not include any adjustments that might result from the outcome of this uncertainty.

Basis of presentation. Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

As required under U.S. GAAP, we deconsolidated our Pillarstone OP, Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC subsidiaries from our consolidated financial statements effective with their bankruptcy filings on March 4, 2024. We previously deconsolidated Whitestone Uptown Tower, LLC effective with its bankruptcy filing on December 1, 2023.

The financial condition and results of operations of the bankrupt subsidiaries are no longer presented in our consolidated financial statements after the effective date of their filings. For periods before the deconsolidation, the Company’s consolidated financial condition and results of operations include those of the deconsolidated subsidiaries as discontinued operations.

Noncontrolling interest in the accompanying consolidated financial statements represents the share of equity and earnings of Pillarstone OP allocable to holders of partnership interests other than us.

Use of estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the deferred taxes and the related valuation allowance for deferred taxes.

Cash and cash equivalents. We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Impairment. We review long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through operations. We determine whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the asset, with the carrying cost of the asset. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. There was no impairment of our long-lived assets during the periods presented.

Stock-based compensation. We account for employee stock-based compensation using the fair value method. Compensation cost for equity incentive awards is based on the fair value of the equity instrument generally on the date of grant and is recognized over the requisite service period. Forfeitures are recognized as they occur. The Company uses the Black-Scholes option pricing model to estimate the fair value of option awards. The Black-Scholes option pricing model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s common stock, the risk-free interest rate at the date of grant, the expected vesting term of the grant, expected dividends, and an assumption related to forfeitures of such grants. Changes in these subjective input assumptions can materially affect the estimated fair value of the option awards.

Income taxes. We have not elected to be taxed as a REIT for federal income tax purposes. As such, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We are also subject to certain state and local income, excise and franchise taxes. The provision for state and local taxes has been reflected in the provision for income taxes in the consolidated statements of operations and has not been separately stated due to its insignificance.

F-9

We file tax returns federally and in the state of Texas. Our returns for periods prior to 2023 are no longer subject to examination by tax authorities in these jurisdictions. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. If a tax position meets the “more likely than not” recognition criteria, accounting guidance requires the tax position be measured at the largest amount of benefit greater than 50% likely of being realized upon ultimate settlement. We record income tax related interest and penalties, if any, as a component in the provision for income tax expense.

Earnings per share – Basic earnings per share amounts are calculated by dividing income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share amounts are calculated by dividing income available to common shareholders by the weighted average number of common shares and common stock equivalents outstanding which are not antidilutive. Common stock equivalents represent shares issuable upon the assumed conversion of outstanding convertible notes and preferred shares and the assumed exercise of outstanding options.

Fair Value Measurements.  We measure the fair value of financial instruments based on assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. In accordance with the fair value hierarchy, Level 1 assets/liabilities are valued based on quoted prices for identical instruments in active markets, Level 2 assets/liabilities are valued based on quoted prices in active markets for similar instruments, on quoted prices in less active or inactive markets or on other “observable” market inputs, and Level 3 assets/liabilities are valued based significantly on “unobservable” market inputs.

Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts and notes payable.  The carrying value of cash, cash equivalents, accounts receivable and accounts payable are representative of their respective fair values due to their short-term nature.  The fair value of our convertible debt instrument, which consisted of a fixed rate unsecured note, approximated its carrying amounts due to the near-term maturity of the instrument.

Concentration of Risk. We maintain cash accounts in major U.S. financial institutions. The terms of these deposits are on demand to minimize risk. The balances of these accounts sometimes exceed the federally insured limits, although no losses have been incurred in connection with these deposits.

Segment reporting. Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is its Chief Executive Officer, who reviews financial information presented on a consolidated basis, including consolidated net income (loss), to make operating decisions, assess financial performance, and allocate resources. Based on the information regularly reviewed by the CODM, the Company has determined that it operates in one operating and reportable segment. The measure of segment profit or loss regularly reviewed by the CODM is consolidated net income (loss), as reported in the accompanying consolidated statements of operations. The significant segment expense categories regularly provided to the CODM and included in the reported measure of segment profit or loss are general and administrative expenses and interest expense, each of which is presented as a separate line item in the accompanying consolidated statements of operations. All of the Company’s assets are located within the United States.

Recent accounting pronouncements. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 require incremental disclosures related to a public entity’s reportable segments and increase the frequency with which most segment disclosures are made. Incremental disclosures required by the ASU include significant segment expenses regularly provided to the chief operating decision maker (“CODM”) and included within the segment’s measure of profit or loss, the title and position of the CODM and an explanation how the CODM uses the reported measure of a segment’s profit or loss to assess performance and allocate resources, and the amount and composition of other segment items necessary to reconcile segment revenue, significant expenses, and the reported measure of profit or loss. The ASU also expands interim disclosure requirements such that nearly all annual quantitative segment disclosures will be made on an interim basis. Lastly, ASU 2023-07 requires that entities with a single reportable segment provide all segment disclosures that are not evident from the primary financial statements, including significant segment expenses, consistent with the approach used by management to evaluate performance, which affects the Company’s disclosures. We implemented ASU 2023-07 effective with the Company’s 2024 annual report, and included required disclosures herein.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The amendments in ASU 2023-09 require reporting entities to disclose annual income taxes paid, net of refunds, disaggregated by federal, state, and foreign taxes and to provide additional disaggregated information for individual jurisdictions that equal or exceed 5% of total income taxes paid, net of refunds. ASU 2023-09 also requires public business entities to disclose additional categories of information about federal, state, and foreign income taxes in their annual rate reconciliation table and provide more information about some categories if the quantitative threshold is met. The ASU will also require disclosure of amounts and percentages in the annual rate reconciliation table, rather than amounts or percentages, and will eliminate certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. We adopted ASU 2023-09 starting with the Company’s 2025 annual financial statements and are making prospective disclosures in these financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). The amendments in ASU 2024-03 require public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory, employee compensation, and depreciation, amortization, and depletion expenses for each caption on the income statement where such expenses are included. ASU 2024-03 is effective starting with the Company’s 2027 annual financial statements and on a quarterly basis thereafter. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. The Company is currently evaluating the extent to which its disclosures will be affected by the ASU.  

F-10

On March 4, 2024, bankruptcy cases were filed by Pillarstone OP, as well as Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, the subsidiaries owning our Real Estate Assets other than Uptown Tower, which were consolidated into the jointly administered cases styled In re: Whitestone Industrial-Office, LLC, et. al., Case No. 24-30653-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

As required under U.S. GAAP, we deconsolidated Pillarstone OP and its subsidiaries from our consolidated financial statements effective March 4, 2024, the date of the bankruptcy filings. As such, Pillarstone OP and its subsidiaries’ financial condition and results of operations are no longer presented in our consolidated financial statements after this date.

In the first quarter of 2024, we recognized a receivable of $4.05 million representing the estimated fair value of our interest in Pillarstone OP and its subsidiaries and an associated gain on deconsolidation of $864 thousand. In December 2025, we received $4.05 million as part of the settlement in the jointly administered bankruptcies of Pillarstone OP, Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC.

The following table summarizes the effects of the deconsolidation of Pillarstone OP and its subsidiaries on the consolidated balance sheets:

F-11

Pillarstone OP and its subsidiaries’ results of operations for periods presented before its deconsolidation are presented as discontinued operations in our consolidated financial statements. The following is a summary of the major classes of line items constituting income from discontinued operations shown in the consolidated statements of operations:

Significant accounting policies applicable to the discontinued operations include:

Revenue recognition. All leases on our properties were classified as noncancelable operating leases, and the related rental income was recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements were capitalized or charged, as applicable, to accrued rents and accounts receivable.

Real estate.  Land, buildings and improvements were recorded at cost. Expenditures related to the development of real estate are carried at cost. Depreciation was computed using the straight-line method over the estimated useful lives of 5 to 39 years for improvements and buildings. Tenant improvements were depreciated using the straight-line method over the life of the improvement or remaining term of the lease, whichever was shorter.

Accrued Rents and Accounts Receivable. Included in accrued rent and accounts receivable were base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. We reviewed the collectability of charges under our tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property was located. We recognized an adjustment to rental revenue if we deem it probable that the receivable would not be collected.

Unamortized Lease Commissions and Deferred Legal Cost. Leasing commissions and deferred legal cost were amortized using the straight-line method over the terms of the related lease agreements. Costs allocated to in-place leases whose terms differed from market terms related to acquired properties are amortized over the remaining life of the respective leases.

On November 20, 2015, five trustees on our board of trustees, two of whom are no longer trustees, loaned $198 thousand to the Company in exchange for convertible notes payable. The convertible notes payable accrue interest at 10% per annum and originally matured on November 20, 2018. The convertible notes payable were convertible by the noteholders into common shares at the rate of $1.331 per common share at any time. Accrued interest on these convertible notes was approximately $164 thousand as of December 31, 2025 and $179 thousand as of December 31, 2024. In January 2026, we repaid the convertible notes including only interest accrued prior to the filing of the bankruptcy petition pursuant to our plan of liquidation and bankruptcy court proceedings.

F-12

Pillarstone equity. We have authority to issue up to 450,000,000 shares of beneficial interest, $0.01 par value per share, of which 400,000,000 are classified as common shares of beneficial interest, $0.01 par value per share and 50,000,000 are classified as preferred shares of beneficial interest, $0.01 par value per share. Of the 50,000,000 preferred shares of beneficial interest, 1,518,000 shares are designated as Class A Cumulative Preferred Shares ("Class A Preferred Shares") and 300,000 shares are designated as Preferred Class C Convertible Preferred shares ("Class C Preferred Shares").

Preferred shares. The Company has outstanding 256,636 Class A Preferred Shares of which 95,226 Class A Preferred Shares were issued to the public. The Class A Preferred Shares bear a liquidation value of $10.00 per share. We have the right to redeem the Class A Preferred Shares.

Effective June 30, 2003, we issued 696,078 Class A Preferred Shares valued at approximately $2.4 million to James C. Mastandrea, our Chairman and previous Chief Executive Officer and President, and John J. Dee, our previous Chief Financial Officer and Senior Vice President, pursuant to separate restricted share agreements. Under each restricted share agreement, the restricted shares vest upon the date our gross assets exceed $50 million. None of the restricted shares have vested. While the Company's gross assets exceed $50 million, when considering its 18.6% ownership of Pillarstone OP, its effective ownership of gross assets is less than $50 million.

In conjunction with a one-time incentive exchange offer for Class A Preferred shareholders, Messrs. Mastandrea and Dee exchanged 534,668 of these restricted Class A Preferred Shares into 163,116 restricted common shares. The restrictions described above are also applicable to their common shares. The 161,410 restricted Class A Preferred Shares continuing to be held by Messrs. Mastandrea and Dee can each be converted into 0.305 restricted common shares.

Holders of the remaining 95,226 Class A Preferred Shares did not participate in the one-time exchange offer above and, as a result, these Class A Preferred Shares are convertible into 0.046 common shares, subject to certain formulas.

Effective September 29, 2006, Pillarstone filed articles supplementary to its Declaration of Trust, as amended, restated and supplemented with the State Department of Assessment and Taxation of Maryland designating 300,000 Class C Preferred Shares. The Class C Preferred Shares have voting rights equal to the number of common shares into which they are convertible. Each Class C Preferred Share is convertible into common shares by dividing the sum of $10.00 and any accrued but unpaid dividends on the Class C Preferred Shares by the conversion price of $1.00. The Class C Preferred Shares have a liquidation preference of $10.00 per share, plus any accrued but unpaid dividends, and can be redeemed by the board of trustees at any time, with notice, at the same price per share.

Restricted Common Shares. The following table summarizes the activity of our unvested restricted common shares:

In the above table, 163,116 restricted shares vest upon meeting performance goals as discussed under “Preferred Shares.” Since the grant date, we have determined that meeting these performance goals is not probable, and no compensation expense has been recognized related to this grant. The grant date fair value of $1.8 million would be recognized at the point we deem it probable that we would meet the performance goals. The balance of 5,333 restricted shares had grant date fair values totaling $79 thousand, which was recognized in prior periods though the restrictions remain on the shares.

At the 2016 Annual Meeting of Shareholders, our shareholders approved the 2016 Equity Plan ("2016 Plan"). The 2016 Plan provides that awards may be made in common shares of the Company or units in the Company’s operating partnership, which may be converted into common shares. There were 2,086,654 shares available for grant under the 2016 Plan at December 31, 2025. The plan expired on March 23, 2026.

The Company did not recognize any stock-based compensation expense for trustee compensation or employee stock-based compensation in the periods ended December 31, 2025 or 2024.

Options. The Company had a single option award outstanding for 667 shares of our Common Stock for $33.75. This option terminated in February 2025.

F-13

The Company has provided a full valuation allowance on the Company’s deferred tax assets because the Company believes it is more likely than not that its deferred tax assets will not be realized. The Company evaluates the recoverability of its deferred tax assets on a quarterly basis. There was no income tax expense (benefit) for the year ended December 31, 2025. In 2024, the Company had deferred income tax expense of $486 thousand. 

As part of the Pillarstone OP bankruptcy settlement, a $1 million “Partnership Tax Reserve” was established to satisfy state and federal tax obligations through the December 31, 2025 arising from the Company’s allocable share of Pillarstone OP’s taxable income.

A reconciliation of the expected statutory federal tax and the total income tax expense from continuing operations was as follows:

Deferred tax assets and liabilities consisted of the following (in thousands):

F-14

The following is the computation of earnings per basic and diluted share:

Expense Reimbursements. Under its Amended and Restated Agreement of Limited Partnership, dated December 8, 2016, Pillarstone OP was responsible for all expenses relating to its organization, the ownership of its assets and its operations. It is also responsible for the administrative and operating costs and expenses incurred by us as General Partner of Pillarstone OP, including, without limitation, all expenses relating to the General Partner’s (i) continued existence and subsidiary operations, (ii) offerings and registration of securities, (iii) preparation and filing of any periodic or other reports and communications required under federal, state or local laws and regulations, (iv) compliance with laws, rules and regulations promulgated by any regulatory body, and (v) operating or administrative costs incurred in the ordinary course of business on behalf of the Partnership; provided, however, that such costs and expenses shall not include any administrative or operating costs of the General Partner attributable to assets owned by the General Partner directly and not through Pillarstone OP or the Subsidiaries.

F-15

Indemnification provisions within the Pillarstone OP Amended and Restated Agreement of Limited Partnership also provide for indemnification by Pillarstone OP of all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts, arising from or in connection with any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, relating to Pillarstone OP or the General Partner or the operation of, or the ownership of property in which an indemnitee may be involved, or is threatened to be involved, unless a court of competent jurisdiction established that indemnification was not permitted under the circumstances described in the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

These reimbursement provisions provided the Company with critical sources of cash and liquidity to maintain our operations. Following Whitestone’s abrupt termination of managerial services to Pillarstone OP, we incurred significant costs to internalize management, and to select and implement an enterprise-wide system of our own. We also incurred substantial legal costs in our litigation with Whitestone.

The Company had no assets, activities or operations other than those related to Pillarstone OP. Hence, all of our costs and expenses were reimbursable under the applicable provisions of the Amended and Restated Agreement of Limited Partnership. We recorded reimbursements from Pillarstone OP totaling $671 thousand and $229 thousand in the years ended December 31, 2025 and 2024, respectively, for operating and administrative expenses incurred.

Summary. The following table presents the revenue and expenses with related parties included in our consolidated statement of operations (in thousands):